Bitcoin and US stocks are starting to show early signs of weakening their correlation
The safe haven asset is forging its own path in the face of market volatility.
James Van Straten | Edited by Parikshit Mishra , April 17, 2025, 8:23 AM.
Key points:
- Gold has set 12 consecutive daily highs, indicating strong interest despite overall weakness in the US stock market.
- The precious metal's price dynamics are increasingly uncorrelated with US stocks, indicating a possible shift in investor behaviour towards safe haven assets.
- Fed Chairman Powell rejected the “Fed put” theory, signaling that investors should not count on the central bank to intervene to cushion the blow to stock markets during a downturn.
Bitcoin (BTC) and U.S. stock price movements caught the attention of investors on Wednesday, revealing the first signs of weakening correlation between the two.
In a standard diversified portfolio, assets are expected to show little or no correlation. For example, gold continues to hit all-time highs, setting 12 new daily records this year, clearly indicating an imbalance with U.S. stocks.
While Bitcoin is often seen as a vehicle for leveraged speculation on the Nasdaq 100, recent trends suggest that this link may be weakening.
Take BlackRock's iShares Bitcoin Trust (IBIT), which only trades during regular U.S. market hours. It closed up 0.46% on Wednesday, even as the Nasdaq 100 fell more than 3%, down 4.5% at one point, which would have been the fifth-biggest drop in history.
Strategy (MSTR), a Bitcoin play in the Invesco QQQ Trust (QQQ), ended the day up 0.30% despite all of the Magnificent Seven tech stocks closing in the red, highlighting the growing divergence.
The correlation between Bitcoin and the Nasdaq fluctuated throughout the day. For example, during Fed Chairman Jerome Powell’s speech, both assets fell simultaneously. However, Bitcoin later rebounded above $84,000, while the Nasdaq continued to hit new intraday lows before recovering at the close.
Powell's comments were tougher than expected, citing inflation concerns fueled by uncertainty and rising tariffs as an “emerging risk.” Short-term inflation expectations also rose.
Markets were particularly concerned about Powell's answer to the question: “Is there a Fed put option for the stock market?” Powell's answer: “I would say no.”
The “Fed Put” is a long-standing market theory that the Fed will step in to stabilize markets during sharp downturns, a safety net that Bitcoin, as a bearer asset, lacks to begin with. The question now remains: was Powell bluffing, or is the Fed truly abandoning its role as a market backstop?
