Bitcoin Surges 6.77% to $93,883, Decoupling from U.S. Tech Stocks

Bitcoin has recently surpassed the $90,000 mark for the first time since early March, fueling optimism that it may be decoupling from its long-term correlation with U.S. tech stocks. On Tuesday, Bitcoin surged by 6.77%, and on Wednesday, it continued its upward trend, reaching a high of $93,883 per coin during the Asian session. Meanwhile, the U.S. dollar index, which had fallen to a three-year low on Monday, showed signs of recovery. The Nasdaq-100 index, despite a significant rebound after a sharp decline on Monday, remained well below its highs from late February to early March.

Previously, Bitcoin had been briefly affected by the risk asset sell-off triggered by Trump's tariffs, but it rebounded more than 20% from its low point on April 7. During this period, Bitcoin's trading behavior began to resemble that of gold, which has performed exceptionally well amidst the uncertainty surrounding tariffs. This decoupling from U.S. risk assets is largely attributed to the weakening of the U.S. dollar, providing some relief to cryptocurrency bulls. Since Trump's return to the White House in January, the market has not seen the anticipated cryptocurrency rally. Despite a notable increase in April, Bitcoin's current price is still approximately 16% lower than its historical high of nearly $110,000, reached on the day Trump was inaugurated.

The decoupling from the U.S. market may rejuvenate the long-term bullish narrative of Bitcoin as a store of value. Over the past year, there has been criticism that Bitcoin merely acted as a leveraged proxy for the Nasdaq. However, recent developments suggest that Bitcoin is showing signs of decoupling. In the past week, Trump's harsh criticism of Federal Reserve Chairman Powell, accusing him of raising interest rates too slowly, has heightened investor anxiety and reinforced the notion that the "American exceptionalism" narrative is coming to an end. Concurrently, market expectations for more details on the "strategic Bitcoin reserve" plan in the coming weeks are acting as a significant catalyst for the cryptocurrency rebound. Trump signed an executive order in early March proposing the establishment of a national-level Bitcoin reserve and other token reserves, requiring the Treasury Secretary to submit an assessment of the plan's legal and investment feasibility within 60 days.

The 60-day deadline set by Trump's executive order is now less than two weeks away, and any statements questioning the Federal Reserve's independence have had a positive spillover effect on Bitcoin. Additionally, positive news emerged on Tuesday evening, with reports that several major financial institutions are in discussions to establish a $3 billion special purpose acquisition company (SPAC) to absorb a large amount of cryptocurrency assets, further boosting market sentiment. Bitcoin's futures and options markets also show signs of renewed bullish demand. One clear indicator is the CME's Bitcoin basis, which is the difference between the spot price and the futures price, reaching a three-month high. Simultaneously, the number of open contracts has seen a moderate increase. This suggests that the market is once again increasing its long positions.

In the Bitcoin options market, heavy positions used to hedge against significant downside risks are gradually being unwound. This shift in market sentiment from downside hedging to buying call options has led to an increase in trading volume. However, the offshore perpetual contract market is sending a different signal. Perpetual contracts, or "perps," are the primary tool for investors outside the U.S. to bet on cryptocurrency assets. These contracts have no expiration date and use funding rates to transfer holding costs. If the funding rate is negative, it indicates an overall bearish market sentiment. The market remains cautious. Data from the cryptocurrency derivatives platform shows that the open interest in put options with a strike price around $70,000 remains high in the short term.

This recent surge in Bitcoin coincides with a similar rise in gold prices, which briefly touched $3,500 per ounce on Tuesday before retreating. If Bitcoin continues to trade like gold rather than a tech stock, the decoupling narrative will become more convincing. Another sign of a shift in sentiment is the significant inflow of $3.81 billion into U.S.-listed Bitcoin ETFs on Monday, the largest single-day inflow since January 30. If Bitcoin's price remains stable above $88,800, it could further drive its price towards the $92,000 to $94,000 range. However, this rally may soon face a correction. A pullback to at least $88,000 would not be surprising, given the market's recent rapid gains.