According to CryptoQuant analyst Darkfost, since October 2025, the relationship between Bitcoin and the S&P 500 has undergone a significant change. Traditionally, Bitcoin has been viewed as a high-volatility version of the stock market, showing a strong positive correlation with equities. However, this relationship has recently broken down, with the 30-day correlation turning negative, marking an unusual “decoupling” phase.
Turning Point: Massive Liquidation Event
This shift began with a large liquidation event from October 10 to 11, 2025, when approximately $19 billion in leveraged positions were wiped out. Open interest (OI) decreased by about 70,000 BTC, representing not just a price shock but a structural reset in market risk tolerance.
Leverage and Liquidity Divergence
Following this event, leverage ratios failed to recover, and market liquidity weakened. Traders became more cautious, as seen in the persistent demand for hedging and risk aversion. In contrast, the stock market remained resilient supported by AI-driven profits, creating a divergence: stocks are driven by fundamentals, while cryptocurrencies are driven by liquidity and leverage.
Impact of ETF Capital Flows
ETF capital flows further widened this gap. Outflows from spot Bitcoin ETFs indicated weak institutional demand, turning ETFs into a source of selling pressure.
Geopolitical and Risk Aversion Reversal
A notable recent reversal is that, amid rising geopolitical tensions in Iran, stocks declined while Bitcoin strengthened. Rising energy prices sparked inflation concerns, pushing up bond yields and increasing corporate earnings risks. Yet, Bitcoin showed relative strength, reflecting some capital rotation—funds moving from stocks into Bitcoin as a short-term diversification tool.
Deleveraging and Structural Advantages
Importantly, the crypto market had already deleveraged, with lower leverage ratios reducing downward pressure. This allows new capital inflows to more directly drive prices higher.
Conclusion
Disclaimer: The information on this page may come from third parties and does not represent the views or opinions of Gate. The content displayed on this page is for reference only and does not constitute any financial, investment, or legal advice. Gate does not guarantee the accuracy or completeness of the information and shall not be liable for any losses arising from the use of this information. Virtual asset investments carry high risks and are subject to significant price volatility. You may lose all of your invested principal. Please fully understand the relevant risks and make prudent decisions based on your own financial situation and risk tolerance. For details, please refer to
Disclaimer.
