The Nasdaq plummets, gold soars, where will Bitcoin go?

Author: Peter Schiff

The Nasdaq index has currently fallen by 12%. If this adjustment evolves into a bear market, and the correlation between the Nasdaq and Bitcoin remains unchanged (i.e., for every 12% drop in the Nasdaq, Bitcoin drops 24%), then when the Nasdaq's decline expands to 20%, the price of Bitcoin may still hold around $65,000. However, if the Nasdaq enters a true bear market, the decline could far exceed 20%.

Historical data shows that after the tech stock bubble burst, the Nasdaq index plummeted nearly 80%; during the 2008 financial crisis, it fell by 55%; and during the outbreak of the pandemic in 2020, the index also saw a drop of 30% at one point. The average decline during these three bear markets was about 55%. Even if this bear market's decline is smaller, at only 40%, Bitcoin's drop could reach 80%, falling to around $20,000. However, considering Bitcoin's high volatility, if the sell-off intensifies, it is not impossible for it to drop below $20,000 or even reach lower prices.

On the other hand, the correlation between gold and the Nasdaq has always been negative. Since the Nasdaq peaked on December 16, 2023, gold has risen by 13%, almost forming a perfect 1:1 negative correlation. If this trend continues, when the Nasdaq's decline reaches 40%, the price of gold could break through $3,800. However, if the stock market crashes while the dollar experiences significant depreciation in the foreign exchange market, gold's increase could far exceed $3,800.

If the price of gold rises to $3,800 while Bitcoin drops to $20,000, then the price of Bitcoin measured in gold will fall by more than 85%. This would completely crush the market expectation of Bitcoin as "digital gold" or a "store of value" asset. At that point, governments and institutional investors will lose their reasons for holding Bitcoin, and the U.S. and state governments will be even less likely to include Bitcoin in their strategic reserves. Additionally, Bitcoin ETF investors may also sell off their assets in large quantities, further intensifying market selling pressure. In this scenario, companies like MicroStrategy, which hold a large amount of Bitcoin, may struggle to maintain the stability of their balance sheets and ultimately face bankruptcy risks.

Overall, if this stock market crash resembles historical trends, gold may become the ultimate safe-haven asset, while Bitcoin's market positioning will face severe challenges. Whether Bitcoin can successfully detach from the risk asset attributes of tech stocks in this broader environment and truly establish its value positioning as "digital gold" will be a key focus for the market in the future.