Bitcoin (BTC) broke its long-standing correlation with tech stocks as the US-Iran war stretched into its third week.
Key takeaways:
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Bitcoin is outperforming tech stocks amid the US-Iran war, indicating its growing demand as a geopolitical hedge.
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BitMEX co-founder Arthur Hayes warns that BTC’s renewed bullish strength may result in a dead cat bounce.
BTC correlation with Nasdaq turns negative
Over a consecutive 52-week period, BTC’s correlation with the tech-heavy Nasdaq Composite Index (IXIC) stood at -0.06, the lowest level since December 2018. This marked a sharp reversal from multi-year trends in which correlations hovered between 0.60 and 0.92.
The correlation turned negative in late February, coinciding with the US and Israeli attack on Iran.
Since February 28, when the war began, BTC/USD is up more than 15%, while the Nasdaq has fallen around 2%.
This divergence suggests that traders are increasingly treating Bitcoin as a geopolitical hedge rather than a purely technology-related risk asset.
Why is Bitcoin decoupling from tech stocks?
A key driver of Bitcoin’s strength appears to be Strategy’s aggressive BTC accumulation.
Over the past two weeks, the Michael Saylor company purchased 40,331 BTC, with part of the purchase funded by ATM sales of its STRC preferred shares.
That buying spree amounted to approximately 9 to 10 times the Bitcoin mined over the same period, meaning demand significantly outstripped new supply.
At the same time, US spot Bitcoin ETFs attracted more than $12.22 billion in inflows, adding another strong source of demand.
Another factor supporting the bulls’ argument is the increase in stablecoin liquidity tied to wartime demand from the Middle East. The market capitalization of USDC has risen to a record near $79.57 billion, up from $70 billion at the beginning of February.
The surge comes as demand for dollar-backed stablecoins has reportedly surged in hubs like Dubai amid the US-Israel-Iran war.
The increase in USDC supply points to greater dollar liquidity flowing into digital assets, adding to demand for Bitcoin just as Strategy’s buying spree is tightening available supply.
Joe Consorti, head of growth at Bitcoin equity firm Horizon, said Bitcoin is passing its “geopolitical stress test,” and some macro models hint that the price may reach $100,000 in the coming months.
Arthur Hayes warns of “dead cat bounce”
Despite the recent divergence, not all analysts are convinced that Bitcoin has become structurally decoupled from stocks.
In a March 5 post, BitMEX co-founder Arthur Hayes said Bitcoin’s recent rally toward the mid-$70,000 range could be a “dead cat bounce,” warning that continued weakness in SaaS stocks amid tighter financial conditions would likely drag BTC lower.
Bitcoin remains more closely tied to US SaaS stocks than to the broader Nasdaq index.
Unlike the Nasdaq, which includes defensive and diversified sectors, SaaS companies such as Salesforce, Adobe and Zoom are high-growth, liquidity-sensitive assets that have largely moved in line with macroeconomic conditions similar to those of cryptocurrencies.
Related: Arthur Hayes says he’s waiting to buy Bitcoin until the Fed eases policy
Hayes’ caution is now reflected in market data.
The Coinbase Premium Index has remained negative for 30 consecutive days, pointing to weak spot demand in the US and suggesting that the recent rally lacks strong institutional follow-through.
Furthermore, Bitcoin’s recent pullback from the $76,000 resistance area, which also aligns with the upper trendline of its prevailing bearish flag pattern, increases the odds of a fall towards the lower trendline around $68,000.
A decisive drop below $68,000 risks sending the BTC price tumbling towards the downside target measured at around $51,000.
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