Why Bitcoin Is Falling Behind Record-Breaking Stocks

Analysts have said that currently, stocks and Bitcoin are being driven by entirely different market forces.

Global stocks have been making new highs recently, but Bitcoin (BTC), the biggest cryptocurrency based on market capitalization, is trading at almost 42% below its lifetime highs.

This split has left crypto investors searching for answers, especially since the market has lumped the two asset classes together under the “risk-on” label.

Diverging Drivers Between Equities and Bitcoin

According to market researchers at XWIN Japan, the reason for the divergence is simple: stocks and BTC are running on “different engines.”

They noted that equity gains are tied to growth in AI-linked earnings, capital spending from firms like Nvidia, and share buybacks, as well as steady ETF inflows. As such, investors can point to profit growth that is real and visible.

However, Bitcoin does not carry earnings or cash flow, with its price depending on new capital entering the market, which leaves it more exposed to liquidity shifts.

Right now, per XWIN’s assessment, that capital isn’t arriving. Recall that spot Bitcoin ETFs have recorded notable outflows during the second half of May, with data from SoSoValue showing that since May 15, the funds have lost more than $3.5 billion. In that time, the biggest outflows were recorded on May 18 ($648.64 million) and May 27 ($733.43 million). There hasn’t been a single green day since the $131.31 million that flowed in on May 14.

XWIN’s analysts also pointed out that in past strong cycles, the price of Bitcoin was often backed by growing user activity. But currently, the asset is increasingly resembling a market where price is elevated while participation is fading. And that, they said, is the key difference.

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“Stocks rise because companies generate profits. Bitcoin rises when new liquidity and new participants return,” they explained.

As a result of the above, investors have been allocating more funds to stocks, which they see as “profit growth assets,” while taking away from those that depend on liquidity, including BTC.

And it’s not all talk. As noted by analyst Ash Crypto earlier today, the Nikkei crossed 66,500 for the first time ever on May 29, with Japanese stocks adding about $3.2 trillion this year alone. The story was the same in Korea, whose KOSPI also hit a new all-time high, adding 150 trillion won to its total market value.

What Bitcoin Needs

As the Nikkei and KOSPI shone, Bitcoin yesterday crashed to about $72,600 per CoinGecko data, with market watchers suggesting it may have been affected by the resumption in hostilities between the USA and Iran, as well as someone offloading a huge $1.3 billion position in BlackRock’s spot Bitcoin ETF, IBIT.

The flagship crypto has since dragged itself back above $73,000, but that’s hardly impressive, considering that it had been trading close to $78,000 at some point in the last seven days. The current price also represents a drop of more than 4% in the past month, as well as a nearly 32% decline year-on-year.

To turn things around, XWIN’s analysts stated that Bitcoin needs stronger ETF flows, a rise in its on-chain activity, and improvement in the Coinbase Premium. They also believe that a weaker dollar could help bring about a more sustained revival for the cryptocurrency.