Crypto vs Stocks: What's the Connection?

Are crypto and stock prices linked, or is their relationship largely coincidental? Many new crypto investors wonder why Bitcoin, often viewed as operating independently of traditional financial systems, sometimes reflects movements seen in the stock market. While cryptocurrencies and traditional stocks differ fundamentally, their price behaviors occasionally show similarities.

This article explores the potential connections between cryptocurrency and stocks, including any historical correlations that may exist, and highlights the factors that influence price dynamics in both markets. 

The cryptocurrency space—particularly Bitcoin—has gained traction as a decentralized asset, developed to facilitate peer-to-peer transfers without third-party involvement. Despite this, Bitcoin’s price movements have, at times, aligned with those of major stock indices such as the NASDAQ and S&P 500.

This occasional alignment may reflect Bitcoin’s growing integration with traditional financial systems. Some investors, especially those with exposure to tech sectors, may treat Bitcoin similarly to high-risk growth assets. As a result, shifts in broader investor sentiment—whether optimistic or risk-averse—can influence demand for both equities and Bitcoin. These overlapping behaviors suggest that Bitcoin’s market dynamics could increasingly be shaped by broader financial sentiment and cross-market participation. 

In its early years, Bitcoin showed minimal correlation with traditional equities. From 2009 to 2017, it often moved independently, partly because many institutional investors remained cautious about crypto exposure. This contributed to Bitcoin’s relatively distinct price behavior compared to stocks.

After years of operating on the fringes of finance, Bitcoin began drawing broader attention during the 2017 bull run, when its price surged to nearly $20,000 amid a wave of retail speculation. The rally was followed by a sharp correction in 2018—often dubbed the beginning of the "crypto winter," which saw Bitcoin lose over 80% of its value. While U.S. stock markets, particularly the S&P 500, continued to climb steadily during this period, Bitcoin decoupled, entering a multi-year downturn driven by regulatory uncertainty, the collapse of the ICO boom, and broader risk-off sentiment in the digital asset space.

From 2018 through 2019, Bitcoin traded in a relatively range-bound market, showing low correlation with U.S. equities, which were buoyed by strong corporate earnings and accommodative monetary policy. During this time, crypto markets operated largely on their own narrative cycles—centered around technological developments, infrastructure growth, and the early signs of institutional interest.

A shift occurred in 2020 when the COVID-19 pandemic created unprecedented market reactions and widespread volatility across global financial systems. During that period, both Bitcoin and major stock indices declined significantly in March and rebounded in the months that followed. Since then, Bitcoin’s price movements have, at times, mirrored those in the equity markets more closely.

Contributing factors include the introduction of Bitcoin and crypto ETFs and evolving regulatory frameworks that facilitate greater institutional involvement. These developments have increased Bitcoin’s integration into traditional financial systems, particularly among investors with exposure to the technology sector.

Still, Bitcoin periodically decouples from equities, especially during crypto-native events such as the 2022 FTX collapse, highlighting its unique risk factors and market structure. 

The evolving relationship between Bitcoin and equities can be attributed, in part, to several factors that have linked the two markets over time.

1. Market Integration 
   As institutional involvement in digital assets has grown, Bitcoin has gained exposure within traditional investment portfolios. The introduction of crypto-related ETFs has expanded access to Bitcoin for a broader range of market participants. Institutions such as BlackRock and companies like MicroStrategy have played a visible role in this trend by incorporating Bitcoin into product offerings or treasury strategies.
2. Macroeconomic Factors 
   Interest rates, inflation trends, and geopolitical developments influence both stocks and digital assets. For example, rising interest rates tend to reduce appetite for risk across markets, affecting demand for both equities and Bitcoin. These macroeconomic conditions help shape performance across asset classes.
3. Investor Psychology 
   Some investors approach Bitcoin similarly to high-growth or speculative equities. This behavioral overlap can contribute to heightened volatility and, at times, reinforce short-term correlations, particularly during periods of uncertainty or market stress.
4. Economic Policies 
   Monetary policy, such as rate hikes or liquidity injections, can influence both markets simultaneously. Because Bitcoin is often viewed as a commodity or store of value by some market participants, its perceived utility may shift in response to changes in monetary conditions. In such environments, investors frequently reassess their portfolio exposures, affecting both traditional and crypto assets. 

Despite being fundamentally different asset types, cryptocurrencies and stocks share several behavioral similarities:

Supply and Demand Influence 
Both Bitcoin and individual stocks are influenced by supply and demand dynamics. Shifts in market interest or changes in availability may contribute to price fluctuations, though outcomes depend on broader market conditions.

Market Volatility 
While Bitcoin is typically more volatile, large cap stocks also experience substantial price swings, influenced by macroeconomic trends, company-specific developments, or sector performance.

Investment Strategies 
Some investors apply similar strategies across both markets, such as buy-and-hold approaches, trend-following, or portfolio diversification. However, differences in market structure, liquidity, and regulatory oversight can lead to differing outcomes.

Dependency on Sentiment 
Market sentiment plays a meaningful role in driving short-term price movements. Positive developments can attract buying activity, while adverse news may prompt selloffs—though the magnitude and persistence of these moves vary. 

While they share some behavioral traits, cryptocurrencies and stocks differ in several important ways:

Ownership Structure 
Stocks represent ownership in a company, often accompanied by voting rights and potential dividend payouts. Bitcoin, by contrast, represents control over a digital unit on a decentralized network. It does not confer rights to company profits or cash flows, but it is a bearer asset, meaning whoever holds the private keys has full control and ownership, without the need for an intermediary.

Price Determinants 
The value of a stock is typically influenced by corporate performance, earnings, and sector trends. Bitcoin’s price, on the other hand, is shaped by factors such as mining economics, network usage, adoption rates, and overall market sentiment.

Regulation 
Traditional equities are governed by well-established regulatory frameworks. Crypto assets, however, operate in less-defined legal environments in many jurisdictions, introducing regulatory uncertainty and distinct risk considerations.

Supply Mechanisms 
Public companies can issue new shares to raise capital, increasing the supply of stock. Bitcoin’s supply is capped at 21 million coins, with issuance following a predetermined halving schedule that gradually reduces the rate of new supply. 

While Bitcoin and companies listed on the NASDAQ, there have been multiple instances where their price trends have shown alignment. Below are a few notable examples:

• December 2018: Both Bitcoin and the NASDAQ experienced significant declines amid a broader market sell-off. Bitcoin plunged nearly 45% from its early-November levels, marking its lowest point in over a year. The NASDAQ dropped by approximately 18% over the same period, entering bear market territory as concerns over slowing global growth and rising interest rates weighed on investor sentiment.
• June 2019: Bitcoin saw notable gains during a period of renewed interest in digital assets, while the NASDAQ rose alongside recovering tech stocks and improving economic sentiment.
• February 2020: Both markets rose early in the month before declining sharply as the onset of the COVID-19 pandemic began to impact global investor sentiment. Bitcoin initially gained momentum but dropped soon after, while the NASDAQ mirrored this reversal as investors pulled back from risk assets.
• March 2021: Both Bitcoin and the NASDAQ reached elevated levels, supported by post-pandemic recovery narratives, expansive fiscal and monetary policies, and increased participation from both institutional and retail investors.
• November 2021: Bitcoin’s price movement began to track more closely with the NASDAQ, reflecting its treatment by many institutional participants as a higher-risk tech-aligned asset. Volatility in both markets was influenced by inflation concerns and expectations of monetary policy tightening.
• May 2022: Broader economic concerns—such as rising interest rates and slowing growth—led to coordinated declines across both Bitcoin and major equity indices. Both markets experienced downward pressure followed by brief periods of recovery.

These examples highlight moments of alignment, though the strength and consistency of correlation between Bitcoin and equities can vary significantly over time. 

Although the crypto and stock markets are increasingly interconnected, they remain influenced by different structural and economic drivers. Broader macroeconomic trends such as interest rates, inflation, and geopolitical developments impact both asset classes, often shaping investor sentiment across the board.

However, the regulatory environment distinguishes them significantly. Publicly traded companies operate under well-established, regulated frameworks, while cryptocurrencies like Bitcoin are governed by a patchwork of rules that continue to evolve globally. This regulatory uncertainty contributes to the unique risk profile of digital assets.

Supply dynamics also highlight fundamental differences. Bitcoin’s fixed supply of 21 million coins introduces an element of scarcity that cannot be altered, while companies can issue new shares, thereby affecting the outstanding supply of stock. In terms of adoption, equities benefit from decades of institutional participation. In contrast, Bitcoin’s adoption is still expanding—through mechanisms such as spot ETF listings and integration into payment systems, which broaden access and utility over time. 

For those new to the digital asset space, understanding the connection between Bitcoin and traditional equities can provide context for market behavior. While Bitcoin has at times reflected broader stock market trends, particularly during periods of heightened risk aversion or macroeconomic shifts, it remains structurally distinct in how it is valued, traded, and regulated.

As the cryptocurrency sector matures and regulatory clarity improves in jurisdictions such as the U.S. and Canada, the overlap between Bitcoin and traditional financial markets may deepen. Institutional investors, in particular, are actively exploring Bitcoin as a component of diversified portfolios, leading to closer alignment with established benchmarks such as the S&P 500.

Still, Bitcoin retains characteristics that separate it from equities, especially in terms of decentralization, scarcity-driven valuation, and sensitivity to crypto-native developments. Recognizing these differences, alongside the shared influences, can help investors better navigate the evolving relationship between traditional finance and digital assets.