1/ BTC is Losing the Support
2/ Risk Appetite Continues to Decline
3/ Semiconductors Test Key Support
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1/
BTC is Losing the Support
The BTC/SPX ratio measures the relationship between the price of Bitcoin (BTC) and the S&P 500 index (SPX), offering insight into the relative performance of the cryptocurrency compared to the U.S. stock market.
Both assets have experienced price declines; however, Bitcoin’s percentage drop has been slightly larger than that of the S&P 500 during this specific period. This suggests that, in relative terms, Bitcoin has shown slightly weaker resilience compared to the stock market on this particular day.
The recent volatility across financial markets can be attributed to various factors, including macroeconomic concerns and price movements in the cryptocurrency markets.
Courtesy of StockCharts.com
The ratio had managed to break above 14 points — a level it had remained below since 2021 — at the end of 2024, with expectations that the cryptocurrency would take off into a new super bullish rally. However, reality proved different, as the breakout was short-lived and the recent drop brings new concerns about how much further it could fall.
It has been observed that Bitcoin maintains a positive correlation with the Nasdaq/S&P 500 ratio (NDX/SPX) at least since 2017. This correlation suggests that when the technology sector outperforms the broader market, Bitcoin tends to show stronger relative performance as well. However, the opposite is also true — when the tech sector struggles, Bitcoin tends to underperform.
It’s no surprise, then, that the recent declines in the Nasdaq ($COMPQ) have been mirrored by similar declines in Bitcoin ($BTCUSD), with Bitcoin’s performance currently worse than the broader U.S. market.
A breakdown below 14 points in the ratio could extend the drop all the way to 7 points, which could trigger an even larger wave of liquidations. It’s crucial to closely monitor the performance of the technology sector to get a sense of where this recent decline might find some relief or stabilization.
2/
Risk Appetite Continues to Decline
The analysis of the relationship between the S&P 500 High Beta Index and the S&P 500 Low Volatility Index provides insight into the market’s current preferences for higher-risk assets versus more stable ones.
Courtesy of StockCharts.com
A Ratio > 1 indicates that high beta assets (higher risk) are outperforming low volatility assets, which implies that investors have a greater appetite for risk. However, the trend throughout 2025 has been bearish, after the ratio nearly reached 2 points.
This level has become a clear and strong resistance zone, and after each approach to this area, we’ve seen an immediate reversal.
The bullish rally during 2024 also came to an end as the ratio approached this resistance, signaling a shift in investor sentiment towards a more risk-averse stance.
3/
Semiconductors Test Key Support
The analysis of the relationship between the VanEck Semiconductor ETF (SMH) and the Technology Select Sector SPDR ETF (XLK) provides insight into the relative performance of the semiconductor sector compared to the broader technology sector.
The VanEck Semiconductor ETF (SMH) offers investors a way to track the performance of U.S.-listed companies involved in semiconductor production. The fund’s top holdings include:
- NVIDIA Corporation (19.36%)
- Taiwan Semiconductor Manufacturing Co. (11.42%)
- Broadcom Inc. (5.28%)
- ASML Holding NV ADR (5.05%)
In total, the SMH index includes 25 securities.
On the other hand, XLK, with 66 securities, has a broader exposure to the technology sector. Its top holdings include:
- Apple Inc. (23.47%)
- Microsoft Corporation (23.12%)
- NVIDIA Corporation (4.70%)
- Broadcom Inc. (4.31%)
Over the past decade, SMH has delivered an impressive cumulative return of 775.53%, while XLK has returned 535.34% over the same period. This demonstrates that, in the long run, the semiconductor sector has significantly outperformed the broader technology sector.
Currently, the SMH/XLK ratio is testing a key support level, which could determine whether semiconductors maintain their leadership within the technology space — or if a shift toward a broader, more diversified tech play is underway.
Courtesy of StockCharts.com
The semiconductor sub sector currently represents approximately 25% to 27% of the total weighting within the Technology Select Sector SPDR ETF (XLK).
The importance and weight of semiconductors within the technology sector is exceptionally high — and has grown significantly in recent years due to several key factors:
- Weight within major technology indices: Semiconductors make up a substantial share of leading tech benchmarks.
- Core to the digital economy: From artificial intelligence, cloud computing, and electric vehicles to industrial automation and consumer devices, everything depends on chips.
- Outperformance over time: Historically, the semiconductor subsector has outperformed the broader technology sector.
Semiconductors aren’t just another subsector within technology — they are the backbone supporting all future technological growth. That’s why we are watching so closely what could happen at this key level in the SMH/XLK ratio, and the implications a break below this support zone could have for the broader tech landscape.
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Originally posted 28 February 2025
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