The S&P 500 index accumulated a rise of over 16% in 2025, reaching a historic high, while Bitcoin fell by 3% during the same period, marking the first time since 2014 that the two have moved in completely opposite directions.
The global financial markets in 2025 presented a peculiar split: on one side, Wall Street was optimistic, with major U.S. stock indices hitting new highs; on the other side, the king of cryptocurrencies, Bitcoin, lingered in the range of $85,000 to $90,000.
Once regarded as a "risk asset barometer," Bitcoin is now experiencing a significant decoupling from traditional financial markets. Historically, Bitcoin was a "high beta partner" during stock market rallies, but in the second half of 2025, Bitcoin fell nearly 18%, while the Nasdaq Composite Index rose 21% and the S&P 500 index increased by 14.35%.
1. Market Performance: A Tale of Two Extremes
● The performance of the financial markets in 2025 showed remarkable divergence. The S&P 500 index rose over 16%, reaching a historic high. Meanwhile, Bitcoin fell by 3%, marking the first time since 2014 that the two have moved in completely opposite directions.
● This divergence was particularly evident in the second half of 2025. Bitcoin's price quickly retreated from its October peak, erasing its annual gains and becoming its worst-performing month in November, with a drop of 17.67%. During the same period, the three major U.S. stock indices maintained a steady upward trend.
● Data compiled by Bloomberg revealed a thought-provoking fact: even during past cryptocurrency winters, this digital asset rarely exhibited such a clear divergence from other risk assets.
In 2025, Bitcoin's longest consecutive record of hitting new highs in a single day was only 3 trading days, the lowest among all years of new highs, indicating that the upward momentum was difficult to sustain.
2. Multiple Factors Behind the Divergence
The uncertainty of regulatory policies has become one of the main factors behind Bitcoin's weak performance. Although the Trump administration has shown a friendly attitude towards cryptocurrencies, the key regulatory framework has not yet been fully established.
● The Clarity Act passed by the U.S. House of Representatives aims to establish clear rules for digital assets, but the bill currently faces obstacles in the Senate, requiring revisions and lacking a clear voting timetable. Meanwhile, the EU and some Asian regulatory bodies are strengthening regulations on cryptocurrency exchanges and stablecoins.
● From a market structure perspective, the launch of Bitcoin ETFs may have unexpectedly weakened market momentum. When investors can easily gain exposure to Bitcoin through traditional channels, publicly traded companies that were once popular due to the cryptocurrency concept have lost some of their appeal.
● Changes in market leverage and liquidity have also put pressure on Bitcoin. A large-scale liquidation event in early October wiped out about $19 billion in leveraged positions, exposing the market's vulnerability in a high-leverage environment. At the same time, adjustments in the Federal Reserve's monetary policy are affecting market liquidity distribution.
● Internal factors related to Bitcoin cannot be ignored either. Intense debates over network upgrades have led to community divisions, increasing market uncertainty. Meanwhile, some long-term holders have begun to take profits, while retail sentiment remains low, with many investors concerned that the four-year halving cycle may trigger another deep correction.
3. Strong Logic in Traditional Markets
● In stark contrast to the cryptocurrency market, traditional stock markets demonstrated remarkable resilience in 2025. Corporate earnings exceeding expectations became the main driver of the market, with 69% of S&P 500 constituents that have disclosed earnings surpassing analyst expectations, the highest exceedance ratio in four years.
● The strong performance of AI-related stocks became a highlight of the market, with Nvidia even becoming the first company to surpass a market capitalization of $4 trillion on July 9. Investors' risk appetite has clearly increased, and this positive sentiment is not limited to stocks but has spread to other risk assets.
● The market's "desensitization" to potential risks has also supported the strength of the stock market. Wall Street investors have shown unusual resilience in the face of shocks from inflation, tariff threats, and even geopolitical conflicts, with the stock market remaining near historical highs even as Trump escalated trade threats.
● This market psychology has been referred to by some analysts as "TACO trading," meaning the market generally believes that "Trump Always Chickens Out," assuming that trade tensions will ultimately ease.
4. Market Impact of the Decoupling Trend
● The weakening correlation between Bitcoin and U.S. stocks is changing investors' asset allocation logic. Previously closely related asset classes are now showing independent trends, providing new possibilities for portfolio diversification.
● The most directly impacted are publicly traded companies highly correlated with cryptocurrencies. For example, SharpLink Gaming has fully shifted its business towards cryptocurrencies, purchasing over $3 billion in ETH tokens and almost entirely using them for staking to earn yields.
However, the company's stock price faces multiple pressures: regulatory risks may classify ETH as a security, while the company's valuation is too high and technical indicators show bearish signals.
● Cryptocurrency mining companies are also facing challenges. Although TeraWulf has achieved a 120% increase in stock price this year, its debt burden is increasing. As Bitcoin prices fall, the company's debt issues may worsen, with analysts warning that its debt burden could become unmanageable.
5. Institutional Perspectives and Market Sentiment
● Mike McGlone, senior commodity strategist at Bloomberg Intelligence, holds a cautious view on Bitcoin's prospects, stating: "The stock market and gold are both near historical highs, and Bitcoin as the pinnacle of risk assets is melting." This viewpoint reflects a reassessment of cryptocurrencies by some institutional investors.
● Market sentiment has clearly deteriorated, with inflows into Bitcoin ETFs slowing down and support from well-known institutions or individuals diminishing. Matthew Hogan, Chief Investment Officer of Bitwise Asset Management, observed: "Retail sentiment is extremely poor right now, and the market may still have room to decline."
● However, some analysts hold differing views. Stefania Oletta, CEO of FRNT Financial, believes that Bitcoin's poor performance is simply because its previous gains far exceeded those of other assets. She pointed out that over a two-year cycle, Bitcoin's performance still significantly outperforms the S&P 500 index, with the stock market merely "catching up" to Bitcoin's gains.
Standard Chartered's shift in attitude also reflects the divergence in institutional views. The bank has lowered its year-end price forecast for Bitcoin from $200,000 to $100,000 and postponed its long-term target from 2028 to 2030.
6. Future Outlook and Key Variables
● The evolution of regulatory policies will become a key variable affecting Bitcoin's trajectory. The progress of the Senate's review of the Clarity Act, as well as the regulatory attitudes of major global economies towards cryptocurrencies, will directly impact market confidence.
● Changes in the global liquidity environment are also crucial. Derek Lin, head of research at Caladan, pointed out: "The Bitcoin bull markets of 2017 and 2021 were not solely driven by halving but stemmed from stronger, more fundamental factors: global liquidity." With the resolution of the U.S. government shutdown issue, global liquidity may flow back in, thereby supporting Bitcoin once again.
● Changes in market structure should not be overlooked. As Bitcoin trading increasingly resembles a macro asset in institutional portfolios, its response to liquidity, policy, and dollar trends may surpass the impact of traditional cryptocurrency factors like supply shocks.
● The performance of traditional financial markets will continue to serve as an important reference. If U.S. stocks can maintain their current levels of corporate earnings and investor confidence, they may eventually reignite the cryptocurrency market at some point. Historical data shows that since 2020, the correlation between Bitcoin and S&P 500 returns has increased, and during periods of rising correlation, strengthening breadth in U.S. earnings may coincide with a strengthening risk appetite in the crypto market.
Nansen analyst Jack Kenneth noted: "Bitcoin trading now resembles a macro asset in institutional portfolios, responding more to liquidity, policy, and dollar trends than to the mechanical patterns of supply shocks."
While Wall Street analysts are busy explaining why "Trump always chickens out," Bitcoin investors are staring at charts, trying to find the starting point of the next cycle between the support line of $85,000 and the former historic high of $125,000.
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