Bitcoin has broken out of its long-standing correlation with stocks, marking its first year of divergence from the stock market in over a decade.
This marks an increasing divide between crypto and traditional markets and raises questions about what role Bitcoin has in today’s cycle.
A historical market break
Bitcoin and stocks have historically moved together. However, it seems that this relationship has been broken.
Bloomberg data shows that the S&P 500 has risen by more than 16% this year, while Bitcoin is down 3%, marking the first such divergence since 2014.
Such a clear break is unusual even in crypto and has led to renewed scrutiny of Bitcoin's role in global markets. The divergence challenges expectations that regulatory optimism and institutional participation will automatically lead to lasting growth.
It is particularly noteworthy considering the broader market, where stocks related to artificial intelligence are rising, investments are increasing, and investors are flowing back into stocks. At the same time, traditional defensive assets are attracting attention, which may indicate that investors are reallocating rather than embracing increased risk.
Unique pressure factors in the crypto market, including forced liquidations and a significant decline in private participation, have significantly amplified Bitcoin's negative development. Billions in liquidated positions have increased the fall, and what started as a correction has evolved into a broad industry downturn.
As these signals accumulate, market sentiment has weakened, and there is now discussion about whether this is just a normal correction or a sign of larger structural changes.
Normal correction or something more?
Bitcoin has long behaved as a momentum-driven asset, but the decline in steady growth suggests that leadership within risk markets has shifted.
The crypto inflow to Bitcoin ETFs has decreased, well-known supporters have become quieter, and key technical indicators signal renewed weakness.
Price development indicates this declining confidence. Bitcoin has struggled to find new momentum after the October peak of nearly $126,000 and is now closer to $90,000, reinforcing the impression that this divergence is due to faltering conviction and not just short-term volatility.
Despite the current divergence, a longer time perspective makes the picture more complex.
Over several years, Bitcoin has continued to outperform stocks, suggesting that the recent split may reflect a retraction of previous gains rather than a lasting trend reversal.
From this perspective, weak price development may still be consistent with a normal retracement within a broader bull market cycle, even though there are significant year-to-year differences.
