I recently saw a headline on CNBC television: “Bitcoin trades in lockstep with Nasdaq”.

There is also a video from a couple of weeks ago that says, “Bitcoin has been trading like an exaggerated Nasdaq”.

My friend recently noticed the same thing and asked why.

So why is Bitcoin trading somewhat in tandem with the Nasdaq?

It is far from being a perfect correlation, and Bitcoin tends to still be more volatile even with the Nasdaq’s volatility having increased.  Still, I would say that Bitcoin seems as correlated to the Nasdaq, or possibly more, than the Dow or S&P 500 right now.

We are told that Bitcoin is our future money.  We are told about all of the technological advantages of cryptocurrencies and the blockchain, even though these are two entirely different things.

Nasdaq is a market index made up largely of tech companies.  It might make sense that a few individual tech companies would trade somewhat in tandem with Bitcoin, especially if they are invested in Bitcoin or if their products are related to cryptocurrencies.

But the Nasdaq is made up of the heavy hitters like Amazon, Apple, Microsoft, Alphabet (Google), and Tesla.  It doesn’t seem to make much sense that these stocks would largely be trading with a strong correlation to Bitcoin.

I can only think of one explanation.

The Nasdaq and Bitcoin are largely the face of the Everything Bubble.

That’s right.  They are both highly speculative investments right now.  It is hard to even use the word “investments” in this context.

We are finishing up an era of highly loose money.  Price inflation is now roaring, and people who actually have money are trying to find a place to get a good return.  It sure isn’t going to happen in bonds right now.

Some people buy a house, while some people go the more liquid yet perhaps more speculative route and buy Bitcoin and/or tech stocks.

We are in an Everything Bubble.  About the only thing not in a bubble are precious metals.

The Nasdaq and Bitcoin are the big faces of stocks and cryptocurrencies.  They are the big plays.  They are highly speculative.  People take on the high risk for a potentially high reward.

This correlation will eventually be broken once the bubble pops.  Both the Nasdaq and Bitcoin have been hit hard lately.  They are both well off of their respective highs.

My prediction is that eventually Bitcoin will keep going down and the Nasdaq will bottom out.

The reason is that the Nasdaq is made up of companies that have value.  They may be highly overvalued right now, but many of them will still be profitable even after the bubble pops.

I can’t say the same for Bitcoin.  It derives its value because a bunch of semi-libertarian tech nerds declared it to be the future of money.  It caught on when some people started making money (i.e., dollar profits).  It is essentially a roulette table now.  It is just pure gambling at this point.  It may pay off for some, while others lose their shirts.

Bitcoin and the Nasdaq should fall together as the bubble pops.  They will both have periods where they start to rise again and draw some last-minute suckers into the game.  When all of the smoke clears, the Nasdaq may be a good investment again.  Bitcoin is not likely to ever become a significant form of money in society.  Calling it money is just an excuse for the speculators to speculate.