S&P 500 Soars as Crypto Adds $2 Trillion, but Bitcoin Fails to Follow the Rally

The S&P 500 has gained about as much value this month as the entire cryptocurrency market is worth, yet bitcoin has barely gained ground, with the reasons extending beyond the usual explanations.

U.S. equities have regained momentum, while bitcoin has continued to lag behind, following a pattern seen throughout the year. The factors behind this divergence are more complex than they appear.

The S&P 500 has climbed 3.12% this month, adding approximately $2.1 trillion in market capitalization and lifting its total value to a record $70.5 trillion, with the index trading around 7,723 points. The Nasdaq 100 and Dow Jones Industrial Average have also remained strong, signaling broad investor appetite for risk.

Bitcoin, however, has not matched the stock market rally. Despite often moving alongside equities since the market recovery following the 2020 Covid crash, BTC has gained only about 2% this month and remains near $64,600, where it has traded within a narrow range for several weeks.

One reason for bitcoin’s weaker performance is that the current stock market rally is being fueled largely by company-specific themes, especially artificial intelligence and semiconductor growth, rather than a broad-based risk-on environment that typically benefits higher-beta assets like bitcoin.

“Part of the reason is that the equity rally is concentrated in sectors where bitcoin has limited direct exposure, particularly AI and chip-related companies,” said Adam Haeems, head of asset management at Tesseract Group, which oversees more than $500 million in client assets.

Some macroeconomic developments, including falling oil prices and expectations that shipping activity through the Strait of Hormuz could normalize after disruptions caused by the Iran conflict, are supportive for risk assets overall. However, those benefits are reaching traditional equities more quickly than cryptocurrencies.

Haeems explained that lower oil prices could help both stocks and bitcoin, but through different mechanisms. Equities may immediately benefit from reduced operating costs, while bitcoin’s reaction depends on inflation expectations and potential Federal Reserve policy changes, which take more time and remain uncertain ahead of the September meeting.

Paul Howard, senior director at market maker Wincent, highlighted a similar trend, noting that the stock rally is heavily concentrated in AI and mega-cap companies, which does not necessarily translate into cryptocurrency demand.

“The crypto market previously benefited from ETF-driven demand over the past two years, but that momentum has slowed as the sector looks for its own catalyst beyond U.S. equities,” Howard said. He added that regulatory developments and continued stablecoin adoption could provide fresh momentum later in the year.

Crypto-specific challenges weigh on bitcoin

Bitcoin has also faced several internal market pressures that may be limiting its upside potential. These include the $120 million Coldcard wallet exploit, uncertainty surrounding the Clarity Act, and reports that Strategy has been selling portions of its bitcoin holdings.

Haeems said these events have hurt sentiment but have not yet created a broader market crisis or triggered forced liquidations.

He also pointed to higher bond yields as another challenge for crypto markets, as investors may be moving capital into yield-generating assets through stablecoins. The supply of major dollar-backed stablecoins has declined, suggesting reduced liquidity entering the crypto ecosystem.

Haeems noted that USDT supply has fallen from around $190 billion in April to $183 billion, while USDC has dropped from approximately $79.5 billion to $72 billion. With real Treasury yields at their highest levels since 2008, investors are being rewarded for keeping capital outside of crypto markets.

Halving cycle expectations and ETF demand

Another factor influencing bitcoin’s price action is trader positioning around the traditional four-year halving cycle.

Markus Thielen, founder of 10x Research, suggested that many traders are holding back because they believe historical cycle patterns point toward a possible market bottom in October. As a result, investors are waiting rather than aggressively buying.

“Bitcoin traders have shown little urgency to position for a rally even while U.S. stocks continue higher,” Thielen said. He argued that many investors have recently embraced the four-year cycle theory after previously dismissing it, creating a cautious market environment.

Thielen added that traders may be overlooking a potentially bullish signal: bitcoin has remained resilient despite a more restrictive Federal Reserve stance.

He said investors may be underestimating the possibility of a less aggressive Fed policy shift and the chance that bitcoin’s cycle bottom has already occurred.

Other analysts believe inconsistent institutional demand through bitcoin ETFs is contributing to the slowdown. U.S.-listed spot bitcoin funds recently recorded $61.53 million in outflows, ending a weak three-week period of inflows, according to SoSoValue data. Although the funds attracted $626 million this week, the strongest inflow level since early May, analysts say the trend must continue to confirm renewed institutional interest.

Vikram Subburaj, CEO of India-based FIU-registered Giottus.com, said multiple consecutive days of ETF inflows would be needed before a sustained recovery in institutional demand can be confirmed. He identified bitcoin support around $63,000-$63,400 and resistance between $64,500 and $66,000.

Market maker Wintermute raised another concern, suggesting that some ETF inflows may not represent genuine long exposure but could instead be linked to arbitrage strategies.

According to Wintermute, ETF buying has been absorbed without significantly pushing prices higher, indicating that spot buyers may not be taking aggressive long positions. The firm noted that investor appetite has shifted toward individual crypto assets, with ZEC gaining 10.9% over the week and HYPE rising 5% despite broader market weakness.

Wintermute said broader market participation may not improve until bitcoin volatility declines further and BTC establishes a stronger directional move.

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