Bitcoin’s Shift Towards Tech Stock Trading Dynamics

Bitcoin is increasingly mirroring tech stocks as institutional investors treat it as a macro-sensitive asset. Following recent tariff-related declines, its correlation with equities suggests Bitcoin’s evolving role in financial markets. Institutionalization is expected to continue reducing volatility. Experts anticipate further price fluctuations, but potential for new highs remains as the regulatory environment becomes more supportive.

Institutional investors are increasingly treating Bitcoin as a macro-sensitive asset, akin to technology stocks. Historically, Bitcoin acted independently from traditional investments, but recent pricing trends show its performance has become more correlated with the stock market. Following US President Donald Trump’s tariff announcement, Bitcoin experienced a significant decline, mirroring the selloff seen in technology sectors, indicating its evolving role in financial markets.

On April 2, Bitcoin’s value plummeted from $84,600 to $75,000 in one week, reflecting a 10.5% decline closely aligned with the S&P 500 and Nasdaq 100. Adrian Fritz, head of research at 21Shares, emphasizes that this correlation indicates Bitcoin’s shift into a risk-on asset category, heavily influenced by institutional trading patterns tied to macroeconomic events.

As Trump’s tariffs initiated a global flight to safety, both Bitcoin and equities faced rapid sell-offs, prompting concurrent 15% declines in all three assets as investors transitioned towards safer investments, like gold. Conversely, news of a tariff suspension led to a relief rally, with Bitcoin gaining 8.2% alongside a 9.5% rise in the S&P 500, illustrating its responsiveness to broader market sentiment rather than intrinsic value.

Experts, including Ferdinando Ametrano, identify Bitcoin’s dual perception as both a tech stock and a digital gold equivalent. This duality may evolve, but recent behaviour demonstrates Bitcoin’s ties to equities are more pronounced. Concurrently, data indicates Bitcoin’s volatility has decreased over the past five years, reducing from 95% to 52% due to enhanced institutional investment and regulatory developments.

As institutional interest grows, the market structure is tightening, resulting in lower bid-ask spreads and reduced risks, as noted by Fritz. The introduction of regulated financial instruments is further encouraging sophisticated trading strategies among professional investors, solidifying Bitcoin’s role within diversified portfolios.

Anticipating Bitcoin’s future, experts highlight that while a favourable regulatory environment is expected under Trump’s second term, volatility is likely to persist. Silenskyte suggests that macroeconomic liquidity will remain paramount in influencing Bitcoin prices. Ametrano foresees Bitcoin establishing new highs within 12 to 18 months due to favourable regulations and increased institutional participation, although price fluctuations will continue to be a notable characteristic.