Bitcoin Breakout

Is the Correlation Broken?

Bitcoin appears to have regained the momentum it lost in January – surging back above $94K just weeks after brushing a 2025 low of $75K. Despite US equities (and all other US assets, frankly) breathing a sigh of relief this week after Trump relinquished the worst of his tariff brinkmanship, BTC had held firm even before that.

The subsequent crypto-rally comes amid signs that Bitcoin appears to have broken free from the strong correlation with US equities that had shaped its price action in recent months.

‍Our in-house view of 2025 began with several reasons that crypto was uniquely poised to detach from the harsh macro backdrop driving the rest of the market. In particular, we set out three factors that could drive crypto assets:

1. Macroeconomic conditions
2. Supply and demand
3. Regulation

So given that BTC has rallied while macro uncertainty continues to drive further bearishness in US equities after months of strong correlation, what has changed?

(Almost) All Macro Correlations Shifted

Firstly, the macro factors. Has BTC really broken free of the S&P 500 yet?

The chart above goes some way in answering that question: while the strong relationship might not be definitively broken, it has definitely bent. A previously linear relationship between US equities and BTC that had held in the post-election period broke down in April, leading to BTC rallying while the SPX crashed.

This wasn’t the only macro correlation to change in April. Bitcoin’s correlation to the steepness of the US yield curve (2s10s, shown below) shifted sharply to the strongest negative correlation observed over the past two years.

The flight from all US-based assets was not limited to longer-dated US treasuries – the dollar itself weakened significantly as markets were roiled by Trump’s policy-by-tweet (Truth Social post isn’t as catchy) approach to tariffs. Despite initially selling off together, BTC broke this correlation too by holding firm and then rallying in the face of further dollar weakness – a relationship that historically has boded well for BTC.

Note that it wasn’t just the Trump trade that broke down here – BTC and the dollar had moved in tandem from the beginning of 2024.

So if not correlated to equities, and moving inversely to measures of macroeconomic sentiment in the US – what about gold? While not yet proving itself as a flight-to-safety asset in quite the same way, the most recent market uncertainty has seen BTC recover the $90K mark at the same time that gold has repeatedly hit new all-time highs. 

Despite breaking down or forging anew its relationships with most other macroeconomic factors, BTC’s most recent price action has continued its relationship to the spread between the yields on the 10Yr US Treasury and the 10Yr China Government Bond.

We first highlighted this relationship in our report Breaking Bitcoin’s Correlation With Macro, where we discussed the impact of evolving China’s policies, acting as an additional catalyst to widen the spread. However, while the US has been driving macroeconomic moves this time, the yield differential between 10-year US Treasury yields and 10-year Chinese yields appears to continue to provide support for Bitcoin – regardless of the underlying drivers.

Supply and demand

April’s market moves have rocked Bitcoin’s correlation with almost all macroeconomic indicators of note. However, its relationship to supply and demand factors remains largely unchanged.

Starting with the supply side first. BTC has pulled back significantly from its $109K ATH in January. An unprecedented rewrite of global trade policy perhaps justified the jaw-dropping reaction from equity, crypto and fixed-income markets. However, we’ve repeatedly argued that drawdowns upwards of 25%, like we saw recently, are not uncommon in crypto bullruns. 

In addition to that, the downturns in previous cycles have all lasted longer too (assuming that this one is done). While there is no reason for every cycle to last a similar length of time, the chart below highlights two interesting points regarding the factor of time.

Firstly, BTC has underperformed – returns appear to be diminishing with each cycle. But secondly, the previous two of the past three cycles all had BTC peak around 500 days after the halving. When looking from this perspective, the recent price reset appears similar to past cycles, and historical patterns suggest that BTC may not have reached its peak.

On the demand side, we still see a strong correlation between institutional buying of Bitcoin, both via spot ETFs in the US and by corporate treasuries such as that of Michael Saylor’s Strategy. BTC’s return to the mid $90Ks was driven by renewed accumulation. Between April 14 and April 20, Strategy purchased 6,556 bitcoins ($555.8M).Additionally, Spot Bitcoin ETFs saw a major influx, with $912.7M in inflows on April 22. This marked a sharp reversal from the outflows and stagnant activity that had characterised most of April.

Bitcoin’s rise back to the mid-$90,000 range was driven by renewed accumulation. Between April 14 and April 20, Strategy purchased 6,556 BTC worth $555.8 million. Additionally, Spot Bitcoin ETFs saw a major influx, with $912.7 million in inflows on April 22—their seventh-largest daily inflow ever. This marked a sharp reversal from the outflows and stagnant activity that had dominated most of April.

Conclusion

Apparent moderation in some of Trump’s global trade policy set off a relief rally earlier this week that reverberated across an array of asset classes, including crypto. However, BTC had already begun to show signs of a changing relationship with US equities – and not for the first time this year either.

Not only has BTC increased its correlation to gold, the battle-tested safe-haven asset while snapping away from its linear relationship with the S&P 500, it has also been supported by a weakness in the dollar. Not all macro correlations have broken, however. The spread between the US 10Yr Treasury and China 10Yr Government Bond (which we previously highlighted has followed BTC price action) has continued throughout the macro market turmoil.

Our core view remains unchanged – that aside from seriously strong macro headwinds, other crypto-specific factors remain bullish, including demand for Bitcoin from retail and institutional investors alike, and a positive regulatory landscape in the US. The most recent price action may have begun to validate the view that Bitcoin is not just the 501st company in the SPX.