Bitcoin Lags Behind Stocks as Global Liquidity Drops 12%

Global liquidity has turned negative, with Bitcoin underperforming major U.S. stocks over the past two weeks. This shift in risk appetite towards traditional markets is significant, as it reflects a broader change in investor sentiment. Historically, Bitcoin has rallied during periods of increased global liquidity, such as the 2020–2021 bull run. However, when this metric turned negative in late 2021 and 2022, Bitcoin struggled to maintain any upward momentum. The ongoing decline in global liquidity could be a sign of fading risk appetite, typically reflecting stricter monetary policies or tapering fiscal support. This would mean that demand for Bitcoin and other risk-on assets like the S&P 500 may fall.

The latest drop in liquidity has created a watchful mood among investors, who often cut back on crypto assets during volatile market conditions. If liquidity conditions remain tight, upward pressure on Bitcoin could weaken. Over the past two weeks, Bitcoin has shown weaker gains than stocks, which is different from its normal market pattern. The gap between the past two weeks implied that Bitcoin stopped growing while stocks were oscillating close to their highest levels. Bitcoin was in high demand during the tariff-driven confusion, making solid gains afterwards. However, it fell below the 18 ratio point to the S&P 500. Unless Bitcoin reclaims that main threshold, the weakness it is now showing may be momentary.

Investors appear torn, with a muted correlation between Bitcoin and stocks suggesting hesitation. Risk appetite has shifted—at least temporarily—towards traditional markets. Should current macro tensions fall once more, Bitcoin may recover and begin to lead the market as it did after previous shocks. If risk appetite continues to favor stocks, Bitcoin might fall even further and drop below a ratio of 17:1 compared to the S&P 500, mainly if its momentum slips. The 18-mark continues to be key as resistance and 16 as the main support. Sudden shifts in macroeconomics or significant movements in the stock market could be what triggers Bitcoin’s next move.

Bitcoin's recent performance has been cautious, with strong support levels around $74,000. However, the global stock market's plunge has limited Bitcoin's fall, indicating that investors are seeking safer havens amidst market uncertainty. The global financial landscape is increasingly acknowledging the growing influence of cryptocurrencies, with Bitcoin and other altcoins gaining traction in the digital economy. This recognition could further impact Bitcoin's value as more investors consider it a viable asset class.

The shift in risk appetite towards stocks is not isolated to Bitcoin. The stock market has seen a surge in demand, with the number of homes for sale increasing by 12% compared to a year ago. This influx of sellers entering the market suggests a buoyant real estate sector, which could further attract investors away from cryptocurrencies. The cooling of house prices, coupled with the steady market, indicates a stable economic environment that favors traditional investments over the volatile cryptocurrency market.