Bitcoin (BTC) Weakness Sends a Warning to Stocks, Citi (C) Says

Citi has cautioned that the recent weakness in Bitcoin could indicate trouble for the Nasdaq 100 stock index. The bank observed a correlation between Bitcoin’s trading patterns and stock performance, noting that when BTC is above its 55-day moving average, the Nasdaq typically sees improved returns. Currently, Bitcoin is trading below this threshold, which has led to diminished risk-adjusted returns in equity markets. Citi attributed this crypto softness to tightening liquidity conditions, primarily due to the U.S. Treasury’s actions, which have seen bank reserves decline significantly since mid-July. While equities have remained resilient, buoyed by developments in artificial intelligence, Bitcoin is quicker to respond to liquidity shifts. Signs of potential liquidity improvement are emerging as Treasury balances approach levels that traditionally halt cash rebuilding. Further, Citi highlighted new concerns regarding the AI sector, suggesting investors are wary of whether extensive spending in AI will yield adequate returns amid rising costs and supply challenges. Overall, despite current challenges, there is optimism for a potential year-end rally if liquidity conditions improve.

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