07 Feb 2022
Bitcoin fell when FB released weak Q4 report. Why?Last Wednesday, Meta Platforms (FB) released a weak Q4 report. Disappointed traders sent the FB stock down 23%, making Nasdaq decrease 1.9%. Why did the bitcoin price also fall?
Source: Tradingview, Coinbase, CME
Nasdaq primarily consists of tech and many growth companies that react poorly to macro fears, mainly interest rate hikes. From a price action perspective, bitcoin has proven to fit in the same category, being inversely correlated to future interest rates expectations.During the latest years, we have seen a "macroization" of the markets, in which most asset prices have become increasingly correlated to central banks' monetary policies. It also seems that the further out an asset is on the risk curve - the more macro decisions will affect the asset's price.Both bitcoin and Nasdaq are relatively far out on the risk curve, making them vulnerable to macro fears. These assets should be correlated since the same macro mechanisms drive their prices. As we all know, correlation doesn't imply causation, so bitcoin can be correlated with Nasdaq without Nasdaq causing its price movements.Naïvely believing bitcoin to follow the Nasdaq, some algo traders might have programmed their algorithms to sell bitcoin in case of a significant Nasdaq decline. It seems that these trading decisions made the Nasdaq-Bitcoin cause-effect relationship a self-fulfilling prophecy on Wednesday.In the following days, the bitcoin price rallied, which might be caused by bitcoin traders finally realizing that FB's poor performance shouldn't impact Bitcoin since nothing fundamentally changed in the macro picture, nor in Bitcoin.After this incident, has the market finally learned that company-specific events shouldn't impact bitcoin's price?