Bitcoin set to diverge from equities for the first time in a decade
Bitcoin is starting to show signs of divergence from traditional equities in 2025, with the S&P 500 seeing a solid 16% surge while Bitcoin has dipped by approximately 3%, marking the first time in over a decade that this conspicuous split has occurred. This departure from the usual trend between Bitcoin and other risky assets is unexpected, given the widespread anticipation of digital assets flourishing under the reign of President Trump, amid predictions of more favorable regulations and increased institutional acceptance.
At the beginning of the year, Bitcoin reached new heights surpassing $126,000. However, this momentum was short-lived as a significant sell-off lasting two months ensued, triggered by billions in forced liquidations and a decline in retail participation, causing a downturn in the entire cryptocurrency market. Bitcoin’s value plummeted by as much as 4.4% to $88,135, bringing it down by 30% from its peak in October.
Traditionally, Bitcoin has typically mirrored movements in the broader stock market. This connection was particularly pronounced during the pandemic, when rock-bottom interest rates propelled synchronized rallies in stocks, digital assets, and speculative markets. Bitcoin was often viewed as a high-risk asset that reflected growth-driven, risk-friendly trades. However, this correlation seems to have unraveled now, especially against the backdrop of AI stocks skyrocketing, increased capital spending, and a resurgence of investor interest in US equities. Furthermore, traditional safe-haven assets like gold and silver are trading at near-record levels.
Market expert Matt Maley observed that Bitcoin tends to attract momentum-driven investments and, historically, has performed well during bullish phases. However, this year, the influx of capital has favored precious metals, diverting investment away from Bitcoin. Sentiment towards Bitcoin has soured, with dwindling ETF inflows, decreased high-profile endorsements, and numerous market indicators pointing to exhaustion in the market.
Stephane Ouellette from FRNT Financial argues that Bitcoin’s current lag in performance is merely a correction after outperforming other markets in the past. He suggests that Bitcoin’s strong performance over the past two years, primarily due to supportive views from the Trump administration, has forced equities to play catch-up. Ouellette views the current scenario as a normal market correction rather than a sign of Bitcoin’s weakness.
The future path for Bitcoin’s correlation with equities remains uncertain, hinging on various factors such as macroeconomic conditions, liquidity trends, and regulatory shifts. In 2025, the divergence between Bitcoin and traditional assets opens up new discussions for investors on how to incorporate cryptocurrencies into their diversified portfolios.
