Is Bitcoin Finally Decoupling from Equity Markets?

As you may have heard, the recent market selloff has turned into a global market meltdown. But this is not another post about tariffs and a global economic meltdown. We’re only interested in exploring these events through a crypto lens, and ultimately, what they mean for crypto assets.

So where does BTC belong in that story? 

We’ve argued in several previous posts that BTC has fundamental tailwinds that should help it weather this macro storm. However, the storm has intensified since Trump’s Apr 2, 2025 Liberation Day tariff announcement, seeing BTC sink below $75K on Monday. So the real question is: are we at the point in this market meltdown where BTC fundamentals no longer matter—and all bets are off?

Firstly, BTC has held up remarkably well compared to US equities. Despite the S&P 500 more than erasing all of its gains post-November US election, BTC (though down 20% from its January ATH) has not yet pared back all of its post-election gains.

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Last Friday’s move in the S&P that went unmatched by a concurrent selloff in BTC was a big departure from their correlation, but it wasn’t the first. Since April, when Trump announced his reciprocal tariffs, that relationship changed: SPX recorded its largest single day fall since March 2020, while BTC remained strong.

A linear regression of BTC spot levels against SPX absolute levels between December and late March shows a 77% R^2 relationship between the two.

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Despite holding firm above $82K on Friday, BTC did selloff on Sunday afternoon before opening on Monday below $75K. However, the selloff in BTC was nowhere near the magnitude that was suggested by the near-linear relationship in their prices over the previous 3 months—see that in the chart above.

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It’s far too early to read too much into this. Let’s see how the rest of the week unfolds. But this divergence in price behavior could mean one of three things:

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1. BTC is still lagging the move in equities, and there’s more downside to come.
2. The S&P’s sell-off is overstretched, and we may have found a temporary bottom.
3. We're right—and BTC is decoupling from macro risk.

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We do see other signs that BTC is decoupling from equities. Whilst its 90-day rolling correlation of daily returns with risk assets has started to weaken, its correlation with gold, the battle-tested safe haven has moved up. 

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The Question: Where to Next?

Two big themes to watch:

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1. Retail equity flows
2. Crypto options

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Let’s start with retail. At some point, fundamentals go out the window and market behavior takes over. That turning point could be when retail equity holders capitulate. Until then, crypto might still ride the wave. But if retail gives up, nothing will be spared—not even BTC with all its tailwinds.

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So far, retail is holding steady—and even buying the dip. On April 3, 2025, retail investors net purchased a record $4.7 billion in equities—the largest daily inflow in over a decade. But let’s take that with a pinch of salt as retail flows are incredibly volatile.

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On the other hand, crypto implied volatility looks low given all the market uncertainty. We flagged this a few weeks ago when 1M BTC vol was at ~42%. Since then vol has climbed by nearly 20 points, with 1M options now trading at 60%.

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But even with that rise, implied volatility is still low relative to its own long-term history, and remains below realized volatility, which is even higher. This means that the implied vs realized ratios are drifting lower again, as shown in the chart below.

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In other words: options pricing still doesn't fully reflect the risk in the system.

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