Bitcoin (BTC) shows divergence from the U.S. stock market performance, is this a good sign?

  • Over the last week, Bitcoin has shown clear decoupling from stocks by moving opposite to the U.S. equity indices.
  • So far in 2022, Bitcoin and crypto have entered a steeper correction over equities explaining why JPMorgan finds BTC and crypto attractive at this stage.

The world’s largest cryptocurrency Bitcoin (BTC) has been under constant selling pressure and failing to hold around the $30,000 resistance. Earlier today, the Bitcoin price crashed under $29,000 dropping another 2.5 percent.

With this fall, Bitcoin is showing a clear divergence and decoupling from stock. On Thursday, the U.S. equity indices were all trading in green with subdued volatility. Bitcoin, which has been closely following the performance of the S&P 500, did the opposite. While Bitcoin is trading in the negative territory on the weekly chart, the S&P 500 is up 5 percent this week.

Also, Bitcoin draws its comparison closely to the Nasdaq 100 index having significant growth stock. Over the last week, Bitcoin (BTC) has been trading 4 percent negative while the Nasdaq 100 is trading 5.54 percent up in the last five trading sessions.

This is a clear indication that although there’s some relief rally on Wall Street, Bitcoin and the broader crypto space have failed to catch up. Bitcoin is currently trading at its crucial support level of $28,000. Any fall under would drag it down straight away to $25,000 and then to $22,000.

Although Bitcoin took a momentary dip under $28,000 on Thursday, the buyers stepped up pulling it up above the crucial support. Popular crypto analyst Lark Davis explains :

Bitcoin support around $28,600 keeps getting tapped. But the bounces keep getting lower and lower. Forming up a descending triangle pattern. Break down target of this formation could retest the lows around 25-26k.

BTC and crypto performing poorer than stocks in 2022

The year 2022 has been a year of extreme volatility and uncertainty. Global macros, rising inflation, and geopolitical tensions have contributed to a major crash in the U.S. equity market as well as the broader crypto market.

But if we see the year-to-date chart, Bitcoin and the broader crypto space have performed worse than equities. The S&P 500 (INDEXSP: .INX) is down by 15 percent since the start of 2022, however, the broader crypto market has corrected close to 35 percent so far this year. In total, the crypto markets have eroded more than $800 billion of investors’ wealth in the first five months of 2022.

Among all U.S. stock indices, the Nasdaq 100 (INDEXNASDAQ: NDX) has corrected the most and is trading 23 percent negative year-to-date. On the other hand, the Bitcoin price has corrected by nearly 40 percent so far. But despite this correction, banking giant JPMorgan is bullish and crypto. In its recent note to clients, the JPMorgan strategists wrote:

Compared to January and February of this year, the crypto market correction seems like a capitulation over the last 30 days. However, we are optimistic about BTC’s value and the wider crypto market over the near term.