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I have disagreed with a lot of what the Bitcoin gurus say about crypto, but someone sent me a video of one of the crypto gurus that said something I agree with.

He said that you cannot use fundamental analysis to analyze Bitcoin, because it trades on what he called “pure emotion.”

I agree with that 100%.

And if you have watched your social media feel closely over the years you know this is true, because you have seen Bitcoin “HODLR’s” and traders get totally euphoric on moves up and then go totally silent when Bitcoin has it’s crashes.

When it goes up these people start to repost the predictions of the Bitcoin gurus that crypto will one day replace the US dollar and acts as some sort of safe haven that will be the only money people use one day when the stock market crashes.

In reality, though, no one uses Bitcoin as money in the real world.

And more importantly, Bitcoin has actually always traded WITH the US stock market, and the Nasdaq in particular.

Check out this chart and look at the correlation indicator on the bottom of it.

As you can see the 200-day day price movement correlation between Bitcoin and the Nasdaq is 0.67. It actually normally has been over .90, but the correlation dipped this summer when Bitcoin badly lagged the US stock market, after the Bitcoin ETF’s began to trade, and did nothing for months, while everything else went up.

When this indicator is at one it means that the two things being measured traded 100% with each other the same amount up and down. A -1 means they trade opposite to one another.

Bitcoin has been, and still is, more closely correlation to the Nasdaq QQQ than anything else in the financial markets.

Bitcoin basically trades as a call option on the Nasdaq.

So, when the Nasdaq really gets hot Bitcoin goes up like crazy, and when the Nasdaq has a 20% drawdown or bear market than Bitcoin completely crashes.

This has been it’s nature since it’s creation and has been confirmed in the past three months of price action once again.

Bitcoin is NOT like gold.

It is NOT a safe haven.

It is an instrument of speculation and leverage, thanks to its volatile nature, in the financial markets.

That is it’s true nature and why it trades on emotion more than anything else.

The Bitcoin guru is right about that, but is he going to be right about his price predictions?

I don’t bet, or risk, my money on people’s price predictions, but ride market trends.

-Mike

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