Bitcoin's Price Now Tied to Wall Street, Institutional Investors' Influence Grows

Bitcoin, often promoted as a decentralized alternative to traditional financial markets, has increasingly been trading in tandem with Wall Street, reacting to shifts in interest rates, tariffs, inflation data, and Federal Reserve remarks. This behavior has led many to question whether Bitcoin is truly independent from the stock market.

On Thursday, Dave Portnoy, the founder of Barstool Sports, raised this very question, noting that Bitcoin's price movements closely mirror those of the stock market. When the market goes up, Bitcoin tends to rise as well, and when the market falls, Bitcoin follows suit. This correlation has become particularly evident during major economic events, such as when President Donald Trump imposed new tariffs on imports into the U.S., causing significant drops in both the stock market and Bitcoin's value.

Mike Marshall, head of research at Amberdata, attributes this behavior to the increasing involvement of institutional investors in the cryptocurrency market. The shift accelerated following the SEC’s approval of spot Bitcoin ETFs in early 2024, which provided institutional investors with new pathways to large-scale exposure. As a result, Bitcoin's price movements are now heavily influenced by broader economic conditions, such as interest rates, inflation, and Federal Reserve policies.

Marshall explains that when investors feel confident and buy more stocks, Bitcoin, as a risky investment, rises with them. Conversely, when investors get nervous and sell stocks, Bitcoin usually falls as well. This behavior suggests that Bitcoin is now acting more like a risky investment tied to tech stocks rather than an independent asset or safe haven.

While some analysts question Bitcoin's independence, longtime believers see the current downturn as a proving ground. They argue that the price action is short-term noise driven by institutional traders treating Bitcoin like tech stocks. However, they maintain that Bitcoin's value proposition lies in its long-term exit from fiat currency, making it the hardest asset ever created.

In summary, Bitcoin's trading behavior has increasingly mirrored that of traditional financial markets, particularly tech stocks, due to the involvement of institutional investors. This shift has led to questions about Bitcoin's independence and its role as a decentralized alternative to traditional financial systems. Despite this, long-term believers in Bitcoin remain steadfast in their conviction that its value lies in its long-term potential as a hard asset.