Citibank: Bitcoin weakness may signal a downturn in the stock market, but liquidity is expected to improve soon

According to CoinDesk, Wall Street giant Citibank has warned that Bitcoin's weak trading pattern may signal a downturn in the Nasdaq 100 index.

Citibank analysts noted in a report on Thursday that Bitcoin's trading behavior has historically been closely correlated with the performance of the Nasdaq 100: when the cryptocurrency's price is above the 55-day moving average, Nasdaq's returns significantly improve. Currently, Bitcoin has fallen below this threshold, and the risk-adjusted returns in the stock market have weakened. The bank's analysts attributed the recent weakness in cryptocurrencies mainly to tightening liquidity conditions. The U.S. Treasury's rebuilding of cash balances, combined with a decline of about $500 billion in bank reserves since mid-July, has drained liquidity and put pressure on risk assets. However, the report pointed out that the Treasury's balance is now approaching levels where rebuilding typically stops, suggesting that liquidity may soon improve, thereby boosting Bitcoin and stocks.