The S&P 500 index has risen over 16% in 2025, hitting a historic high, while Bitcoin has fallen 3% during the same period, marking the first time since 2014 that the two have moved in completely opposite directions.
The global financial market in 2025 presents a peculiar division: on one side is Wall Street's optimistic sentiment, with major US indices hitting new highs; on the other side, the king of cryptocurrencies, Bitcoin, is hovering between $85,000 and $90,000.
Once regarded as the “risk asset barometer,” Bitcoin is now experiencing a significant decoupling from traditional financial markets. Historically, Bitcoin was a “high beta partner” in stock market rallies, but in the second half of 2025, Bitcoin fell nearly 18%, while the Nasdaq Composite Index rose 21%, and the S&P 500 index rose 14.35%.
One, the market performance is divided into two extremes
● The performance of financial markets in 2025 shows a remarkable divergence. The S&P 500 index has risen more than 16%, reaching a historic high. In contrast, Bitcoin has fallen by 3%, marking the first time since 2014 that the two have moved in completely opposite directions.
● This divergence has been particularly evident in the second half of 2025. Bitcoin's price quickly retreated from its October high, erasing its annual gains, and in November, it became its worst-performing month, dropping 17.67%. Meanwhile, the three major US stock indices maintained a stable upward trend.
● Data compiled by Bloomberg reveals a thought-provoking fact: even during past cryptocurrency winters, such digital assets have rarely shown such a clear divergence from other risk assets.
In 2025, Bitcoin's longest consecutive record of hitting new daily highs is only 3 trading days, the lowest of all years with new highs, indicating that the upward momentum is hard to sustain.
Two, the multiple factors behind divergence
The uncertainty of regulatory policies has become one of the main factors leading to Bitcoin's weak performance. Although the Trump administration has shown a friendly attitude towards cryptocurrencies, the key regulatory framework has not been fully established.
● The (Clarity Act) passed by the US House of Representatives aims to establish clear rules for digital assets, but currently, the bill faces obstacles in the Senate, needing amendments and lacking a clear voting timeline. At the same time, the EU and some Asian regulatory agencies are tightening regulations on cryptocurrency exchanges and stablecoins.
● From a market structure perspective, the launch of Bitcoin ETFs may unexpectedly weaken market momentum. When investors can easily obtain Bitcoin exposure through traditional channels, publicly traded companies that were once popular due to the cryptocurrency concept lose some of their appeal.
● Changes in market leverage and liquidity have also put pressure on Bitcoin. A large-scale liquidation event in early October wiped out approximately $19 billion in leveraged positions, exposing the market's vulnerability in a high-leverage environment. At the same time, the Federal Reserve's monetary policy adjustments are affecting market liquidity distribution.
● The internal factors of Bitcoin cannot be ignored. Intense debates about network upgrades have led to community splits, increasing market uncertainty. Meanwhile, some long-term holders have started to realize profits, while retail sentiment remains low, with many investors worried that the four-year halving cycle will trigger a deep correction again.
Three, the strong logic of traditional markets
● In sharp contrast to the cryptocurrency market, traditional stocks have shown remarkable resilience in 2025. Corporate earnings exceeding expectations have become the main driving force in the market, with 69% of S&P 500 constituents that have disclosed financial reports exceeding analyst expectations, the highest exceedance rate in four years.
● The strong performance of AI-related stocks has become a highlight in the market, with Nvidia even becoming the first company to surpass a market value of $4 trillion on July 9. Investor risk appetite has clearly increased, and this positive sentiment is not limited to stocks but has spread to other risk assets.
● The market's “desensitization” response to potential risks has also supported the strength of the stock market. Wall Street investors have shown extraordinary resilience in the face of shocks from inflation, tariff threats, and even geopolitical conflicts; even with Trump escalating trade threats, the stock market remains near historical highs.
● This market psychology is referred to by some analysts as the “TACO trade,” which means the market generally believes that “Trump Always Chickens Out,” thinking that trade tensions will eventually ease.
Four, the market impact of decoupling trends
● The weakening correlation between Bitcoin and US stocks is changing investors' asset allocation logic. Previously closely related asset classes are now showing independent trends, providing new possibilities for portfolio diversification.
● The companies most directly impacted are those highly correlated with cryptocurrencies. For example, SharpLink Gaming has completely shifted its business towards cryptocurrencies, purchasing over $3 billion in ETH tokens and almost all of it for staking to earn yields.
However, the company's stock price is facing multiple pressures: regulatory risks make ETH potentially classified as securities, while the company's valuation is too high, and technical indicators show bearish signals.
● Cryptocurrency mining companies are also facing challenges. Although TeraWulf has achieved a 120% increase in stock price this year, its debt burden is increasing. As Bitcoin prices fall, the company's debt issues may worsen, and analysts warn that its debt burden may become unmanageable.
Five, institutional perspectives and market sentiment
● Bloomberg Intelligence senior commodity strategist Mike McGlone are cautious about Bitcoin's prospects, pointing out: “Stock markets and gold are close to historical highs, and Bitcoin as the pinnacle of risk assets is melting.” This view reflects a reassessment of cryptocurrencies by some institutional investors.
● Market sentiment has clearly deteriorated, with inflows into Bitcoin ETFs slowing and the support from well-known institutions or individuals weakening. Matthew Hogan, Chief Investment Officer at Bitwise Asset Management, observed: “Retail sentiment is currently very poor, and the market may still have downward space.”
● Some analysts hold different views. Stefanna Olet, CEO of FRNT Financial, believes that Bitcoin's poor performance is simply because its previous gains far exceeded other assets. He pointed out that, on a two-year cycle, Bitcoin's performance still significantly outperformed the S&P 500 index, and the stock market was only “catching up” to Bitcoin's gains.
The change in Standard Chartered Bank's attitude also reflects the divergence of institutional views. The bank has revised its year-end Bitcoin price forecast from $200,000 to $100,000 and delayed its long-term target from 2028 to 2030.
Six, future outlook and key variables
● The evolution of regulatory policies will become a key variable influencing Bitcoin's trend. The US Senate's progress on the (Clarity Act) and the regulatory attitudes of major global economies towards cryptocurrencies will directly affect market confidence.
● Changes in the global liquidity environment are also crucial. Derek Lin, head of research at Caladan, pointed out: “The Bitcoin bull markets of 2017 and 2021 were not solely driven by halvings, but by stronger, more fundamental factors: global liquidity.” With the resolution of the US government shutdown issue, global liquidity may flow back, thereby supporting Bitcoin again.
● Changes in market structure cannot be ignored. As Bitcoin trading increasingly resembles a macro asset in institutional portfolios, its responses to liquidity, policy, and dollar trends may exceed the impact of traditional cryptocurrency factors like supply shocks.
● The performance of traditional financial markets will continue to serve as an important reference. If US stocks can maintain the current level of corporate profitability and investor confidence, they may reinvigorate the cryptocurrency market at some point. Historical data shows that since 2020, the correlation between Bitcoin and S&P 500 earnings has increased, and during the period of rising correlation, the strength of US earnings breadth and increased risk appetite in the crypto market may appear simultaneously.
Nansen analyst Jack Kenneth pointed out: “Today, Bitcoin trading resembles a macro asset in institutional portfolios, reacting more to liquidity, policy, and dollar trends than to supply shock mechanical patterns.”
As Wall Street analysts are busy explaining why “Trump Always Chickens Out,” Bitcoin investors are staring at charts, trying to find the next cycle's starting point between the $85,000 support line and the historic high of $125,000.
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