Bitcoin's Dominance Over Stocks May Be Waning, Chart Suggests

Bitcoin's dominance over the stock market may be waning. The S&P 500 has hit a fresh all-time high, while Bitcoin remains in a drawdown. This marks a significant shift from previous years, where Bitcoin consistently outperformed stocks.

The S&P 500-to-Bitcoin ratio has been used to gauge this relationship. When Bitcoin is performing well, the ratio falls as it takes fewer Bitcoins to buy one unit of the S&P 500. However, in recent weeks, this ratio has risen above its 200-week moving average, a level it has never previously breached.

Analysts point to broader market trends as a possible explanation for Bitcoin's struggles. Capriole Investments founder Charles Edwards noted that oil prices have fallen and stocks are rising, suggesting a shift in risk assets. He attributed the weakness in July to a failed peace deal between the US and Iran and 'Situational Awareness liquidation.'

According to 21Shares, the sell-off in Bitcoin has been largely a mechanical unwind of basis trades and Chicago Mercantile Exchange (CME) leveraged funds reducing shorts from around 100,000 Bitcoins at October's high to close to 63,000 as the price fell.