Early Indicators Suggest Bitcoin-U.S. Equity Correlation Is Waning

Bitcoin Diverges from U.S. Stocks as Market Volatility Grows

On Wednesday, Bitcoin (BTC) and U.S. equities moved in opposing directions, prompting investors to take note of the emerging signs that their previously strong correlation may be weakening.

Typically, a diversified portfolio contains assets with little to no correlation. A notable example is gold, which has recently hit multiple all-time highs, setting 12 new daily records this year, in stark contrast to U.S. equities.

While Bitcoin has often been seen as a leveraged play on the Nasdaq 100, recent market movements indicate that this relationship is starting to shift.

A case in point is BlackRock’s iShares Bitcoin Trust (IBIT), which operates within regular U.S. market hours. Despite the Nasdaq 100 plunging over 3%—at one point even dropping by 4.5%, one of its biggest point declines—IBIT closed up by 0.46%.

Similarly, MicroStrategy (MSTR), a Bitcoin-sensitive stock within the Invesco QQQ Trust (QQQ), ended the day up by 0.30%, even though all seven of the major tech stocks in the Nasdaq’s “Magnificent Seven” closed in the red, signaling a growing disconnection between the two markets.

Throughout the day, the correlation between Bitcoin and the Nasdaq shifted. When Fed Chair Jerome Powell spoke, both assets initially fell in tandem. However, Bitcoin quickly recovered above $84,000, while the Nasdaq continued to slide before a modest late-session rebound.

Powell’s comments were notably hawkish, highlighting inflation concerns linked to tariff uncertainties and hikes, which he described as an “evolving risk.” Meanwhile, short-term inflation expectations rose as a result.

The markets were particularly rattled by Powell’s response to a crucial question: Would the Fed step in to prop up the stock market in the event of a downturn? His answer was clear: “I’m going to say no.”

The “Fed put” has long been a cornerstone of market belief, suggesting that the Federal Reserve would step in to stabilize markets during sharp declines. Bitcoin, however, lacks this safety net. Now, the big question remains: Was Powell simply bluffing, or is the Fed truly stepping back from its role as a market stabilizer?