U.S. equities are racing to fresh highs while Bitcoin remains stuck in a narrow range, highlighting a widening gap between Wall Street’s risk appetite and demand for crypto. The S&P 500 is up 3.12% this month alone, with a market capitalization of $70.5 trillion, adding roughly $2.1 trillion in value. Bitcoin was up slightly, by about 2%, trading in a tight range around $64,600.
However, the divergence also means that the rally has been much more subtle and focused on artificial intelligence, semiconductor and mega-cap names, than a macro rotation into high-beta names. Adam Haeems of Tesseract Group noted that Bitcoin has little direct exposure to these sectors, so a rise in the stock market does not always lead to inflows into crypto.
Similarly, Paul Howard of Wincent pointed out that the equity advance had been concentrated in AI and mega-cap stocks. The crypto rally, which was propelled by demand for ETFs, will now need to find a new catalyst, which could come in the fourth quarter as markets seek more regulatory clarity and a continued growth of stablecoin supply. For now, BTC▲$62,630.00 remains detached from Wall Street’s strongest themes.
Falling oil prices and a return to normal traffic through the Strait of Hormuz can support risk assets, though at different lags depending on the asset. Equities see costs for businesses fall immediately; Bitcoin is more dependent on inflation expectations and how the Federal Reserve decides to react. That will take time, and the September outlook remains uncertain for now.
Read More: Bitcoin Search Interest in the US Plunges to a Five-Year Low Despite Crypto’s Political Momentum
Crypto is now facing headwinds, including the $120 million Coldcard hack, the Clarity Act, and the news that Strategy is selling Bitcoin. Haeems attributed the decline to rising bond yields and shrinking stablecoin supply.
USDT▲$0.9991’s market cap decreased from about $190 billion in April to $183 billion. USDC▲$0.9999’s market cap also decreased from $79.5 billion in April to $72 billion. This suggests that capital is rewarded for being tied up in Treasury-related assets.
Another possible issue is the timing, with Bitcoin on its usual four-year halving cycle. 10x Research head of research Markus Thielen said traders could be waiting on the sidelines, with many expecting a cycle bottom in early October. If Bitcoin can withstand a hawkish Fed, it may finally signal that the downside pressure is abating.
Read More: The End of Bitcoin Halving Cycles? How Institutions Changed Crypto Markets
ETF demand, meanwhile, remains another key variable: U.S. spot Bitcoin ETFs have returned to net inflows, but a series of positive sessions are needed to know if institutional demand is durable, analysts say.
Wintermute also believes some of this ETF buying may be linked to arbitrage and may explain why such strong ETF flows have yet to result in a BTC breakout.
