U.S. stocks rallied on Friday, saving the Nasdaq from its worst weekly decline since April. Bitcoin prices continued to sink, dropping 33% from their record high in October to $84,535 on Friday. Market participants are uneasy about the correlation between stocks and bitcoin, wondering if bitcoin’s decline hints at more stock losses.

Investors are concerned about whether bitcoin will continue to be a leading indicator for stocks. While stocks and bitcoin don’t always move together, they have lately, causing worry on Wall Street. Some see bitcoin as a sentiment indicator, reflecting poor overall sentiment in the market.

Stocks tend to trade on fundamentals long-term, but sentiment drives short-term movements. Analysts believe that a pivot in bitcoin could signal a pivot in the equity market. Investors are wary as dip buyers have returned for three consecutive weeks, bringing volatility back each time.

Liquidity in the U.S. financial system has been declining, impacting trading in bitcoin and some stocks. Bitcoin is facing challenges due to worsening liquidity conditions. Despite a drop in the use of the Fed’s standing repo facility later in the week, speculation remains depressed. This could lead to lighter buying forces for U.S. stocks in the short run.

U.S. stocks closed higher on Friday, with the S&P 500 gaining 1%, the Nasdaq Composite rising by 0.9%, and the Dow Jones Industrial Average increasing by 1.1% to 46,245.41. Market participants are closely watching the correlation between bitcoin and stocks, as bitcoin’s decline may signal further losses in the stock market.

Read more at Yahoo Finance: Why bitcoin’s brutal drop from an October record high is now a crucial barometer for the broader market