My great colleague, Mads Eberhardt, is off on a well-deserved mini-summer break, accordingly handing me the keys to the weekly crypto editorial.

As Mads is probably currently stuck with the same feeling I have when I hand the iPad to my almost 80-year-old dad, I’ll stick to connecting the dots between liquidity, the recent sell-off in crypto, and the current sell-off in technology. Do current developments square, or can we find value trades here?

I am an avid follower of the running correlation between Bitcoin and tech stocks since the naturally high correlation between the two asset classes breaks down from time to time, and the correlation breakdowns often hold strong signal value for what’s upcoming.

The current correlation break-down is interesting, as it marks the sixth correlation breakdown since the pandemic, and there’s been an flawless hit ratio in loading up on crypto when the correlation has turned negative on a running 90day basis.

The vertical lines mark correlation break-downs, and we have seen subsequent BTC rallies in each of these six cases. It basically means that we are likely at the inflection point of another material crypto rally.

So does this make fundamental sense, and what can explain this pattern?

Chart 1: BTC Versus Info Tech Correlations and Inflection Points