Bitcoin’s worst relative performance since the FTX era raises eyebrows

Since late August, Bitcoin has broken away from stocks in what appears to be the weakest stock correlation since the chaos of 2022.

The trend created an unusually weak correlation and was reminiscent of rare periods when crypto briefly moved independently of the broader financial markets.

Rare market divergence

Bitcoin has been doing this regularly for many years moved in the same direction as traditional stock markets, especially the S&P 500. During periods of low interest rates and strong economic growth, such as in 2021 and again in parts of 2024, BTC and many altcoins performed well alongside rising stocks.

On the other hand, during periods of heightened fear and tightening monetary policy, including aggressive rate hikes by the Federal Reserve, crypto markets tended to fall along with stocks, as we saw in 2018 and 2022.

A clear example occurred in November 2022, when rising interest rates combined with the FTX collapse pushed Bitcoin to around $15,700. This is one of the most extreme cases where crypto markets fall much more sharply than stocks.

However, over the past six months, Bitcoin has started to move very differently from stocks. Since the end of August, gold is up 51%, the S&P 500 is up 7%, while Bitcoin is down 43%, creating the weakest correlation between BTC and stocks since the market chaos of late 2022.

Instead of keeping pace with stocks, Bitcoin has significantly underperformed as traditional markets have remained relatively stable and gold has posted strong gains. According to Santiment, such dramatic deviations from long-standing correlations typically do not last indefinitely.

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It is clear from previous examples that markets rotate as sentiment and macroeconomic conditions evolve, resulting in changing capital flows over time. Within this context, Santiment added that if BTC eventually returns to its historical tendency to follow stocks during economic expansions, especially in a scenario with three rate cuts in the second half of 2025, there could be significant room for Bitcoin and altcoins to catch up.

Bearish pressure

Bitcoin staged a modest recovery on Wednesday as it briefly climbed above the $66,000 level before giving back some of its gains and stabilizing above $65,000.

But data indicates bearish pressure on the BTC futures market as funding rates remained largely negative within the $62,000-$68,000 range. Moreover, CryptoQuant declared that Bitcoin may not have formed a real bottom yet. Short-term bonds have been selling consistently at a loss for nearly 30 days, and several major selling spikes have been absorbed without producing a sustained recovery.

Despite brief price increases, selling pressure has remained dominant. These rallies act as exit liquidity, and meaningful trend reversal is unlikely until profits for short-term holders turn positive and stay there, the report said.