Bitcoin is marketed as an alternative decentralized financial market to the traditional ones.
However, now that institutions and governments have embraced it, the largest cryptocurrency by market value has been tracking Wall Street, reacting like a volatile tech stock—influenced by interest rate shifts, tariffs, inflation data, and Federal Reserve remarks.
Barstool Sports founder Dave Portnoy raised the question on Thursday that so many investors have: is Bitcoin truly independent of the stock exchange?
If the purpose of Bitcoin was to be non-regulated and independent from the US Dollar, then why is it trading today almost exactly like the US Stock market? Portnoy wrote. Market up, Bitcoin is up. Market down, Bitcoin down.”
This correlation is even more apparent during times of major economic events.
After President Donald Trump imposed new tariffs on imports into the U.S. on Wednesday, the stock market reacted sharply—the Dow dropped 3.98%, the S&P 500 fell 4.84%, and the Nasdaq slid 5.97%.
Bitcoin has fallen 5.5% in the last 24 hours, trading below $82,000. This is far from its January high of $109,000.
Mike Marshall, Amberdata’s head of research, says that Bitcoin’s behaviour mirrors traditional financial markets, and this is not a coincidence.
After the SEC approved spot Bitcoin ETFs early in 2024, institutional investors had new ways to gain exposure.
Marshall explained that “this connection occurred mainly because large institutional investors started buying Bitcoin, and treated it like risky stock, particularly tech companies. This was more apparent after approvals for instruments such as ETFs which allowed institutions to gain exposure.” Decrypt.
Marshall added: “Bitcoin is now often affected by broader economic factors, like interest rates, inflation and Federal Reserve policies.” Risk-on Bitcoin increases when investors buy stocks. When they become nervous and stop buying stocks, the risk-off Bitcoin falls.
Marshall said that, while Bitcoin is still able to react to specific crypto events, its reaction now is heavily dependent on the economic trends impacting traditional stock markets.
Marshall explained that Bitcoin is more of a high-risk investment linked to the tech industry than it is a secure asset.
As hedge funds and analysts question Bitcoin's independence, a deeper reality emerges: Bitcoin may have become a part of the system it was designed to supplant.
"It's just really young to be settled down, "Bloomberg ETF analyst Eric Balchunas told Decrypt."Because it's got all this potential growth baked into it, I think it just acts like a tech stock."
Long-time Bitcoin believers view the recent downturn, which has resembled a stock market, as a test, to determine who is a “diamond hand” and those that are short-term investors.
Swan Bitcoin CEO Cory Klippsten said: “The price movement you are seeing is short-term noise caused by institutional traders who treat BTC as tech stocks.” Decrypt. Bitcoins’ value proposition doesn’t come from short-term gains. This is the exit from fiat in the long term. Bitcoin is the most difficult asset to create.”
James Rubin is the editor
