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Bitcoin’s relation with technology stocks is showing signs of stress. Bitcoin has frequently behaved like a high-beta tech stock over the past five years, with the price going up during rallies in growth stocks and down during risk aversion. This pattern is now breaking.
The iShares Expanded Tech-Software Sector ETF (IGV) has surged since mid-May, while Bitcoin has been trending downward. IGV's shares have rallied from the sluggish performance of many software stocks over the past few weeks, as investors assess the sector's growth brought about by AI.
The market turned from a concern about a 'SaaS apocalypse' to hope for AI to help drive software demand. Business Insider reported that IGV recorded a 13% two-day gain, its strongest move since 2001
Bitcoin has not joined the rebound. Rather, BTC has been driven down by ETF outflows and macro uncertainty below $70,000, as well as Strategy's first disclosed Bitcoin sale since 2022.
Bitcoin’s 20-day rolling correlation with IGV has reportedly dropped to around 0.58. This is notable as it was previously seen that Bitcoin and software stocks have been moving almost in sync.
Previously, CoinDesk noted that Bitcoin's correlation with IGV had climbed to 0.73, indicating a high correlation between the sentiment of the software sector and Bitcoin.
A lower correlation does not automatically mean Bitcoin will rally. However, when there was similar decoupling in the past, it has usually been a turning point. Bitcoin's correlation with software stocks decreased in October 2023, when Bitcoin traded around $25,000.
Within six months, BTC traded close to $70,000. A similar lack of correlation was seen in 2024, preceding a significant Bitcoin rally.
The most recent split seems to be led by crypto headwinds, not the overall tech cycle. As AI earnings and infrastructure demand-driven sentiment improved, software stocks have bounced back.
Bitcoin, on the other hand, faces ETF outflows, geopolitical pressures and fears regarding interest rates.
Between May 26 and May 31, Strategy reportedly sold 32 Bitcoins for approximately $2.5 million at an average price of $77,135 per Bitcoin. As of May 31, the company holds 843,706 Bitcoins and the sale caused a drop in sentiment, as Strategy has long been viewed as a major corporate Bitcoin accumulator.
US spot Bitcoin ETFs saw net outflows for a record 11 straight days, with investors pulling around $3.5 billion over that period, according to SoSoValue.
Also Read: Altcoins: Why Diversifying Beyond Bitcoin Matters for Investors
There are two possible outcomes of the current division. If these potential macro factors abate and investors regain interest in crypto risk assets and ETF demand settles, Bitcoin may catch up. The second is if the software stocks slow down, bringing the equity side closer.
Currently, the first scenario is more positive. Bitcoin's market weakness seems to be a combination of temporary selling pressure and macro uncertainty, whereas software stocks have rebounded thanks to the earnings from AI.
1. Why is Bitcoin’s split from tech stocks important?
Bitcoin has often moved like a high-beta tech asset, rising and falling with growth stocks. The current split suggests BTC is being driven more by crypto-specific pressures than the broader technology cycle.
2. What does Bitcoin’s lower correlation with IGV mean?
Bitcoin’s 20-day rolling correlation with IGV has reportedly dropped to around 0.58. A lower correlation means Bitcoin and software stocks are no longer moving as closely together as they were earlier.
3. Why are software stocks rising while Bitcoin is falling?
Software stocks have rebounded as investors turn more optimistic about AI-driven growth. Bitcoin, meanwhile, has faced ETF outflows, macro uncertainty, geopolitical pressure and weak investor sentiment.
4. How did Strategy’s Bitcoin sale affect the market?
Strategy reportedly sold 32 Bitcoins for about $2.5 million, its first disclosed BTC sale since 2022. Although the sale was small compared with its 843,706 BTC holdings, it weakened sentiment as Strategy is seen as a major Bitcoin accumulator.
5. Could Bitcoin catch up with tech stocks?
Bitcoin could recover if ETF outflows stabilize, macro pressure eases and investor demand returns. However, if software stocks lose momentum, the gap may narrow from the equity side instead.
