S&P 500 has added crypto's $2 trillion market cap this month. Bitcoin is not impressed. Here's why — CoinDesk

RESOLVING THE LEDGER

S&P 500 has added crypto's $2 trillion market cap this month. Bitcoin is not impressed. Here's why — CoinDesk | AIPROPX

The S&P 500 has gained 3.12% this month, adding roughly $2.1 trillion in market cap and pushing its total value to a record $70.5 trillion, with its price at 7,723 points. The Nasdaq and Dow are buoyant too. Wall Street, by every measure, is in full risk-on mode.

Bitcoin isn't following suit, even though, since the COVID crash of early 2020, it has tended to track stocks more often than not. The token is up just 2% this month, trading around $64,600, sitting exactly where it's been gyrating for weeks.

Part of bitcoin’s underperformance stems from the fact that the equity rally is driven primarily by stock-specific narrative, particularly tied to AI, rather than by a broad macro risk-on impulse that would lift beta assets like BTC in tandem.

"Partly because the equity rally is being driven by areas to which bitcoin has little direct exposure, particularly AI and semiconductor stocks," said Adam Haeems, head of asset management at Tesseract Group, which manages more than $500 million in client assets.

Of course, some aspects of macro, such as the renewed drop in oil and hopes for a return to normal flows via the Strait of Hormuz, which had been disrupted by the Iran war, are positive for all risk assets. But they benefit stocks first.

"Lower oil prices resulting from a reopening of the Strait of Hormuz could benefit both markets, but through different channels. Equities receive a relatively immediate benefit through lower business costs. For bitcoin, the effect runs through inflation expectations and then Federal Reserve policy. That takes longer, and the outlook for September remains uncertain," Haeems explained.

Paul Howard, senior director at market making firm Wincent, made a similar point.

"The stock rally is biased towards AI and mega-caps which doesn't necessarily translate into crypto flows," Howard said. "The crypto market rally driven previously by ETF demand the last 2y has been subdued as it now seeks its own catalyst independent of US equities. This likely will come in Q4 when the market expects regulatory clarity and continued stablecoin growth."

Crypto has also been fighting its own battles that may be capping the upside. To name a few: the $120 million Coldcard exploit, uncertainty around the Clarity Act , and reports of Strategy liquidating its BTC .

"Crypto has also faced its own pressures. The Coldcard exploit has damaged sentiment, while Strategy has sold bitcoin in three consecutive months. Neither event has triggered a broader credit event or forced liquidation cycle," Haeems said.

He added that rising bond yields are creating an additional headwind for crypto, leading to an outflow of capital via stablecoins. Leading dollar-pegged stablecoin USDT's supply has dropped to its lowest since 2025.

"I would also watch stablecoin supply. USDT has fallen from about $190 billion in April to $183 billion, while USDC has declined from $79.5 billion to $72 billion. With real Treasury returns at their highest since 2008, capital is being paid to remain outside crypto," Haeems added.

There's also a four-year halving-cycle-related positioning story underneath all of this, and it may be the most counterintuitive piece.

According to Markus Thielen, founder of 10x Research, the lack of bullish impetus is likely the result of a self-fulfilling prophecy about the halving cycle's track record, which suggests a bottom may happen in October. Because most traders have come to believe this, they are simply sitting on the fence, awaiting October.

"Bitcoin traders have shown little urgency to position for a move higher, even as US stocks rally. A key reason: bitcoiners have suddenly, collectively bought into the four-year cycle thesis, which points to a bottom in early October, so they're waiting on the sidelines. This is a notable reversal from last October, when most of these same traders dismissed the four-year cycle outright," Thielen told CoinDesk.

According to Thielen, traders are missing the key point that BTC’s failure to move lower despite the hawkish Fed is itself a bullish signal.

"Traders are underestimating the upside risk from a less hawkish Fed, and overlooking the possibility that the four-year cycle has already bottomed," he noted.

Other market watchers point to erratic demand for ETFs, a preferred vehicle of institutional investors, as the reason for BTC's underperformance. These U.S.-listed funds registered an outflow of $61.53 million, snapping an equally anemic three-week streak of inflows, according to data source SoSoValue. This week, they have pulled in $626 million in investor money, the highest tally since early May, but that trend needs to hold.

"Several consecutive days of inflows will be needed to confirm a sustained recovery in institutional demand," Vikram Subburaj, CEO of India-based FIU-registered Giottus.com, said in an email. For now, he's watching a tight range, with support near $63,000-$63,400 and resistance between $64,500 and $66,000.

The other problem, according to leading market maker Wintermute, is that whatever ETF flow there has been may not be directionally bullish, but could instead be arbitrage.

"That ETF bid getting absorbed without moving price says the marginal buyer in spot isn't outright long," Wintermute noted. "Risk appetite went single-name instead, with ZEC up 10.9% on the week on DCG's Fortitude expanding its Zcash mining footprint and HYPE adding 5% on a dead beta day. For breadth to expand, we likely need to see BTC vol off this floor first."

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