Bitcoin has broken its long-standing connection to stocks. This is the first time in over ten years that bitcoin and stocks have gone in different directions for an entire year.
This change shows that the connection between cryptocurrencies and traditional markets is decreasing. Therefore, many wonder what role bitcoin plays right now.
A historic market breakdown
Bitcoin and stocks have often moved in the same direction. We now see that the relationship has been broken with Bitcoin.
Bloomberg shows that the S&P 500 has increased by more than 16% this year while bitcoin has decreased by 3%. This is the first time since 2014 that such a difference is visible.
A clear difference is unusual, even for cryptocurrencies. Therefore, many are starting to look more at Bitcoin's place in the financial market. This challenges the idea that regulations and institutional investments directly lead to better results.
The difference is particularly noticeable now as AI stocks are rising sharply, companies are investing more, and many are moving their capital back into stocks. At the same time, more are beginning to invest in safe assets, which shows that investors are reallocating instead of taking greater risks.
The pressure on the cryptocurrency market has increased, among other things due to forced sales and fewer individuals participating. Many have sold their positions for billions USD, which has made the decline larger. What initially looked like a common correction quickly became a larger pullback for the entire industry.
As these signs become more frequent, we notice that market confidence has weakened. There are now discussions about whether this is just a common decline or a larger change in the structure.
Is it a common pullback or something more?
Bitcoin has long been an asset that follows trends, but the decreased momentum now shows that leadership among risky assets has shifted to other areas.
The capital flow to Bitcoin ETFs has decreased, well-known profiles talk less about Bitcoin, and technical signals show weaker development.
The price shows a cooler sentiment. Bitcoin has struggled to recover since the peak in October near 126,000 USD and is now closer to 90,000 USD. This strengthens the view that this difference is due to decreased faith in Bitcoin, not just temporary concern.
Even though we now see this difference, the picture becomes more complicated in the long term.
Looking back several years, Bitcoin has still performed better than stocks. This may mean that the recent decline is mostly about the previous high profits now disappearing, not about a decisive change in the trend.
Therefore, the decline may still align with a common pullback in a larger upturn phase, even if it looks different year by year.
