Key Points:
- Gold prices have recorded 12 consecutive days of all-time highs, indicating strong demand as U.S. equities face pressure.
- The performance of gold is increasingly detached from U.S. stock indices, highlighting a shift towards defensive assets by investors.
- Jerome Powell, Chair of the Federal Reserve, has dismissed the idea of a “Fed put,” suggesting that investors should not rely on central bank interventions to stabilize the stock market during downturns.
In recent trading, the relationship between Bitcoin (BTC) and U.S. equities has drawn attention, showcasing early signs of a weakening correlation. Typically, diversified portfolios are expected to exhibit minimal to no correlation. For example, gold has consistently reached new highs, establishing 12 record-setting days this year, marking a clear disjunction from U.S. stock performance.
While Bitcoin has often been seen as a leveraged play on the Nasdaq 100, current trends indicate that this connection might be weakening. For instance, BlackRock’s iShares Bitcoin Trust (IBIT) experienced a 0.46% increase, while the Nasdaq 100 Index dropped over 3%, hitting its fifth-largest point decline in history at one time.
Moreover, a Bitcoin-levered stock such as MicroStrategy (MSTR), included in the Invesco QQQ Trust (QQQ), finished the day positively at a gain of 0.30%, even as major tech stocks performed poorly, emphasizing the growing divergence.
Throughout the trading day, the correlation between Bitcoin and the Nasdaq varied. Notably, both assets declined during Jerome Powell’s address; however, Bitcoin subsequently rebounded above $84,000, whereas the Nasdaq continued to set new intraday lows before a late recovery.
Powell’s comments were perceived as more hawkish than anticipated, pointing to inflation risks influenced by tariff uncertainties and price hikes, characterizing them as evolving risks. Investors found his response to a question about whether the Fed would provide a safety net for the market particularly troubling: “I’m going to say no.”
Historically, the “Fed put” theory suggests that the Federal Reserve will intervene to stabilize markets during sharp downturns, a safety net which Bitcoin lacks as a bearer asset. The lingering question remains: Is Powell’s assertion genuine, or is the Fed gradually withdrawing from its protective role in the markets?
