The latest stock market pullback has been led by technology plays, it’s pretty clear. The tech-heavy Nasdaq Composite closed Thursday down 3.8% from its record high registered last week, while the broader S&P 500 has retreated 2.5% from its peak.

Why Big Tech has been struggling of late, however, is more open to debate. The most popular theory is that rich valuations can’t cope with burgeoning doubts about returns on AI-linked capital investment.

But strategists at Citi, led by Dirk Willer, are skeptical that recent volatility is because of angst over Big Tech ROI. “We will not wade into this debate, as our best guess is that the market will give the companies some more time before expecting a return on investment,” the Citi team said in a note published late Thursday.

Citi does accept that hyperscalers raising debt on and off their balance sheet — rather than using cash — to pay for the AI build-out is a source of worry. But they argue the main cause of the stock market’s latest wobble is declining financial-system liquidity.

And one of the best ways to track that, they reckon, is via the performance of bitcoin. The crypto asset this week fell into bear market territory, having lost more than 20% from its recent record high. The move came as the Treasury is rebuilding its general account (TGA), which in effect takes funds from the market. Since mid-July, bank reserves have fallen by around $500 billion, and such a trend has historically impacted bitcoin, according to Citi.

“Traditionally, falling reserves have also impacted equities negatively, but this did not happen prior to this week. But it is plausible that bitcoin is a more sensitive instrument for pure liquidity, especially with equities caught up in the fundamentally-driven AI narrative,” Citi says.

And the problem for tech stocks is that bitcoin acts as a warning signal for the Nasdaq, Citi suggests. “We had shown in the past that NDX trades much better when bitcoin is trading well, and vice versa,” Citi says. “In particular, being long NDX only when bitcoin is above its 55-day moving average (and lagging it by a day) improves the active information ratio for NDX from 0.95 to 1.4 and is similarly significant for longer 2 and 3 day lags.”

The information ratio measures portfolio returns and indicates a portfolio manager’s ability to generate excess returns relative to a given benchmark.

Bitcoin is currently below its 55-DMA. The good news for the crypto, and by extension tech stocks, is that Citi says the TGA has now reached more than $900 billion, a level at which the Treasury typically has stopped the rebuilding process in the post-COVID period.

“This would suggest that liquidity conditions should improve going forward, which should support bitcoin, and could also get the NDX Santa rally back on track,” says Citi.