Bitcoin has decoupled from its long-standing correlation with stocks, recording its first full-year divergence from stocks in over a decade.
This shift underscores the growing separation between digital currencies and traditional markets, raising questions about Bitcoin's role in the current cycle.
The historic separation of the market
Bitcoin and stocks have historically moved in sync. However, it seems that relationship has evolved.
According to Bloomberg data, the S&P 500 has risen more than 16% this year, while Bitcoin has fallen by 3%, marking the first split of this kind since 2014.
Such a clean separation is unusual even by cryptocurrency standards, prompting renewed scrutiny of Bitcoin's role in global markets. This divergence challenges the expectation that regulatory optimism and institutional participation will automatically translate into sustainable performance.
This is particularly noteworthy considering the broader environment, where AI stocks are rising, capital expenditures are accelerating, and investors are flowing back into equities. At the same time, traditional defensive assets are attracting attention, indicating that investors are reallocating risk rather than broadly embracing it.
The pressures specific to cryptocurrencies, including forced liquidations and a sharp decline in retail participation, have significantly increased Bitcoin's weak performance. Billions in unallocated positions have amplified negative moves, turning what began as a correction into an industrial decline.
With the accumulation of these signals, market sentiment has waned, sparking debate about whether this is a routine correction or a more significant structural change.
Is it natural pullback or something more?
Bitcoin has long behaved as a momentum-driven asset, but the collapse of the ongoing rally suggests that leadership within risk markets has shifted elsewhere.
Inflow to Bitcoin exchange-traded funds has slowed, notable recommendations have become less steady, and key technical indicators are showing renewed weakness.
Price movements reflect that cooled confidence. Bitcoin has struggled to regain momentum since its peak in October near $126,000, now approaching $90,000, reinforcing the sense that this divergence is driven by fading conviction rather than just short-term volatility.
Despite the current divergence, longer-term prospects complicate the narrative.
Over several years, Bitcoin continues to outperform stocks, suggesting that the recent split may reflect a break from previous excessive gains rather than a decisive break in trend.
From this perspective, weak performance may still align with a natural decline within a broader bull market cycle, despite calendar year variances.
