Bitcoin has decoupled from its long-standing relationship with the stock market, marking the first full year of separation from stocks in over a decade.
This change highlights an increasing separation between crypto and traditional markets, raising doubts about Bitcoin's role in the current cycle.
The historic market decoupling.
Bitcoin and the stock market have historically moved in sync, but now that relationship has fractured.
Data from Bloomberg indicates that the S&P 500 index has risen more than 16% this year, while Bitcoin has dropped 3%, marking a separation for the first time since 2014.
Such a clear separation is considered abnormal even by crypto standards, and it prompts a reevaluation of Bitcoin's role in the global market once again. This decoupling challenges expectations that regulatory hopes and institutional participation would automatically lead to sustained performance.
Especially when considering the overall market conditions where AI stocks have surged, investment spending has rapidly increased, and investors are returning to the stock market, while traditional defensive assets have also gained attention. This indicates that investors are rebalancing their portfolios rather than taking broad risks.
The specific pressures on crypto, both from forced asset sales and a sharp decline in participation by retail investors, have clearly contributed to Bitcoin's poor performance. The closure of positions worth billions of USD has exacerbated the price correction, turning it from a correction into a retreat for the entire industry.
As these signals accumulate, the market atmosphere has softened, leading to debates about whether this movement is merely a normal correction or indicating a more significant structural change.
A normal pullback or something more than that.
Although Bitcoin is known as a long-standing momentum-driven asset, the lack of a sustained upward trend indicates that leaders in the risk market are shifting to other assets.
Capital inflows into Bitcoin ETFs have slowed down, support from key figures has diminished, and the latest technical signals indicate weakness once again.
Price movements reflect this cooling confidence, with Bitcoin trying to regain momentum but still facing challenges since the peak in October near 126,000 USD and currently hovering around 90,000 USD, further emphasizing that this divergence results from diminished confidence, not just short-term volatility.
Even though there are differences at the moment, when viewed over a longer timeframe, the story becomes even more complex.
When considering over several years, Bitcoin has still generated better returns than stocks, suggesting that the recent divergence may reflect a reversion of past excess profits rather than a definitive trend change.
From this perspective, the underperformance of prices may still be within the bounds of a normal correction in a broader bull market cycle, even if it appears different according to the calendar year.
