Correlation Between Bitcoin and U.S. Equities Resurfaces, According to Van Straten.

Bitcoin’s growing correlation with U.S. stocks raises concerns about short-term price fluctuations, despite its strong performance.

Since Donald Trump’s election on November 5, Bitcoin (BTC) has surged by approximately 47%, significantly outperforming the S&P 500, which posted a mere 4% gain. Trump’s favorable stance on Bitcoin and cryptocurrencies, along with a Republican-controlled Senate and House, has added to the optimism surrounding Bitcoin, particularly with potential regulatory changes that could benefit the digital asset.

In an exclusive interview with CoinDesk, Andre Dragosch, Head of Research at Bitwise Europe, shared his insights on the factors influencing the divergence between Bitcoin and traditional stocks.

“Bitcoin’s impressive performance stands in contrast to the struggles of the S&P 500, which has been negatively impacted by the Federal Reserve’s hawkish stance on interest rate cuts,” Dragosch explained. “The Fed reduced its expected rate cuts for 2025 to just two, which is lower than the markets had initially anticipated.”

Additionally, the U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against other major currencies, has risen by 5%, exerting additional pressure on risk assets, including Bitcoin. Despite these challenges, Dragosch believes Bitcoin has fared relatively well due to factors like the continued decrease in Bitcoin held on exchanges. “Bitcoin’s supply on exchanges continues to decline, even as some investors take profits,” he noted.

In recent weeks, however, Bitcoin’s correlation with the S&P 500 has increased, reaching 0.88 on the 20-day moving average, according to TradingView data. While Dragosch remains confident in Bitcoin’s on-chain strength in the long term, he cautions that the growing correlation with U.S. stocks could pose short-term risks for the cryptocurrency as macroeconomic factors weigh on the market.