Wednesday’s price action between bitcoin (BTC) and U.S. equities caught investors’ attention, highlighting early signs of a fading correlation between the two. In a typical diversified portfolio, assets are expected to show little to no correlation. For example, gold has continued to hit all-time highs, setting 12 new daily records this year, demonstrating a clear dislocation from U.S. equities.
While bitcoin has often been labeled a leveraged play on the Nasdaq 100, recent trends suggest that this relationship may be weakening. Take BlackRock’s iShares Bitcoin Trust (IBIT), which trades only during regular U.S. market hours. On Wednesday, it closed up 0.46%, even as the Nasdaq 100 plunged more than 3%, down as much as 4.5% at one point, marking its fifth-largest point decline in history.
Furthermore, MicroStrategy’s Strategy (MSTR), a bitcoin-levered play included in the Invesco QQQ Trust (QQQ), finished the day up 0.30%, even as all of the Magnificent Seven tech stocks closed in the red, underscoring this growing divergence.
Throughout the day, the correlation between bitcoin and the Nasdaq fluctuated. For instance, while Fed Chair Jerome Powell was speaking, both assets dropped in tandem. However, bitcoin later rebounded above $84,000, while the Nasdaq continued to reach new intraday lows before recovering into the close.
Powell’s comments leaned more hawkish than expected, citing inflation concerns driven by tariff uncertainty and increases, labeling them an “evolving risk.” Moreover, short-term inflation expectations have also moved higher, contributing to market unease.
Markets were particularly unsettled by Powell’s response to a pivotal question: Is there a Fed put for the stock market? His succinct reply: “I’m going to say no.” The “Fed put” is a long-held market theory suggesting the Fed will step in to stabilize markets during sharp downturns, a safety net that bitcoin, as a bearer asset, inherently lacks.
This raises an open question: Was Powell bluffing, or is the Fed truly stepping away from its role as market backstop? Investors are left to ponder the implications of a monetary policy that may not support traditional equity markets, further strengthening bitcoin’s position as an independent asset class.
