Bitcoin (BTC) has posted its weakest performance relative to equities since the FTX collapse in late 2022, falling 43% over the past six months while the S&P 500 gained 7% and gold surged 51%, a divergence that analytics firm Santiment says is historically unsustainable.
What Happened: BTC Decouples From Stocks
Since late August, BTC has moved in the opposite direction of traditional markets, breaking a long-standing pattern of correlation with equities. Gold has climbed sharply. Stocks have held steady. Bitcoin has dropped.
The gap represents the weakest BTC-to-equities correlation since the market turmoil of late 2022, when rising interest rates and the FTX implosion pushed Bitcoin down to roughly $15,700.
According to Santiment, such dramatic deviations from historical correlations do not typically persist. Previous instances show that markets rotate as sentiment and macroeconomic conditions shift, resulting in changing capital flows over time.
Santiment added that if BTC returns to its historical tendency of tracking equities during economic expansions - particularly in a scenario involving three interest rate cuts in the second half of 2025 - there could be significant room for Bitcoin and altcoins to recover.
On Wednesday, Bitcoin briefly climbed above $66,000 before pulling back to stabilize above $65,000, but funding rates in the BTC futures market remained largely negative across the $62,000-$68,000 range. CryptoQuant stated that Bitcoin may not have formed a true bottom yet, noting that short-term holders have been consistently selling at a loss for nearly 30 days, with multiple large sell spikes absorbed without triggering a sustained rebound.
"These rallies are acting as exit liquidity, and a meaningful trend reversal is unlikely until short-term holder profits turn positive and remain there," the CryptoQuant report added.
Why It Matters: Correlation Breakdown Signal
The decoupling matters because Bitcoin has historically moved in lockstep with the S&P 500 during both rallies and selloffs, making this divergence a rare outlier. In periods of low interest rates and economic growth, such as 2021 and parts of 2024, BTC and altcoins performed well alongside rising stocks.
During tightening cycles - including the aggressive Federal Reserve rate hikes in 2018 and 2022 - crypto declined alongside equities. The current environment, where stocks and gold are rising while Bitcoin falls, does not fit neatly into either pattern.
Santiment's data suggests that when correlations break this sharply, a reversion tends to follow. If macroeconomic conditions shift toward easing later in 2025, BTC could see a substantial catch-up move.
Yet CryptoQuant's analysis warns that the near-term picture remains bearish. Selling pressure has stayed dominant despite brief price pumps, and until short-term holders move back into profit, a sustained recovery appears unlikely.