Global markets struggled through 2025 after shifts in the United States’ trade policies weighed on risk assets.
Both the S&P 500 and the Nasdaq posted drawdowns earlier this year. However, Bitcoin [BTC] suffered sharper pressure, particularly during the fourth quarter.
Even so, Bitcoin increasingly diverged from equities.
Correlation hit yearly lows
Historically, Bitcoin and U.S. equities showed a strong correlation during major market cycles. That relationship weakened materially in recent months.
According to analyst Darkfost, BTC’s correlation with the S&P 500 and the Nasdaq fell to yearly lows. The divergence emerged after markets cooled following tariff and trade-war concerns.
While U.S. equities maintained upward momentum, Bitcoin struggled to regain its prior uptrend.
Source: S&P Global
The S&P 500 rose about 2.06% quarter-to-date and roughly 16% year-to-date, climbing from near 5,400 to around 6,900. At the same time, the Nasdaq Composite gained about 4.76% in the fourth quarter and roughly 20.12% in 2025.
By contrast, Bitcoin remained under pressure after a drawdown of roughly 36%. Its recovery attempt stalled, widening the performance gap.
Source: Checkonchain
Bitcoin’s correlation with SPX dropped to around -0.299, while correlation with the Nasdaq fell near -0.24.
Correlations with Gold and the U.S. Dollar Index also weakened, while U.S. Treasuries showed relative strength.
Long-term metrics told another story
Short-term underperformance contrasted with Bitcoin’s longer-term return profile.
Using the Compound Annual Growth Rate, Bitcoin continued to outperform traditional assets over longer horizons. CAGR filtered out short-term volatility and focused on sustained growth.
Source: Checkonchain
Bitcoin’s five-year CAGR stood above 200%, translating to roughly 47% annually. Over the same period, the S&P 500 averaged near 17%, while the Nasdaq sat close to 20%.
That data suggested Bitcoin’s long-term correlation with equities remained asymmetric, driven more by return potential than short-term co-movement.
What the divergence meant
The correlation breakdown carried mixed implications for Bitcoin.
On one hand, weakening alignment reinforced BTC’s status as a distinct asset class. Equity market drawdowns may not automatically spill into crypto.
On the other hand, decoupling limited Bitcoin’s ability to benefit from equity rallies. Capital rotated into artificial-intelligence and data-center stocks, leaving crypto sidelined.
That divergence left Bitcoin trading independently, with macro sentiment exerting uneven influence.
Final Thoughts
- Bitcoin’s decoupling from equities reframed its role within broader markets rather than weakening its long-term case.
- That independence may increase short-term volatility, but it could also redefine how BTC responds to future macro shifts.