Equity investors have bet so heavily on a Goldilocks economic scenario that stock funds now command a record 64.7% of assets tracked by EPFR Global, yet Bitcoin has largely sat out the rally, according to market data, marking a notable divergence from historical patterns.
The record equity allocation reflects growing investor confidence that the Federal Reserve will manage to bring inflation under control without triggering a severe recession. Lower-than-expected inflation readings in June, including a 0.4% month-over-month decline in the Consumer Price Index, have reinforced expectations for rate cuts later this year.
Bitcoin, which has historically behaved like a high-beta technology stock, has broken from that correlation in recent weeks. The leading cryptocurrency has traded in a relatively tight range near $64,000, underperforming major equity indices that have pushed to new highs. The S&P 500 and the tech-heavy Nasdaq have both posted gains in recent weeks, while Bitcoin remains roughly 50% below its all-time high.
Analysts point to several factors behind the divergence. The crypto market is still digesting the aftereffects of the 2025 bull run and subsequent correction, with many retail traders remaining on the sidelines. Institutional flows into Bitcoin ETFs, while still positive, have slowed compared to the pace seen in late 2024 and early 2025.
Geopolitical tensions have also weighed on crypto sentiment. Recent U.S. airstrikes on Iran-linked targets and renewed trade frictions with China have contributed to a risk-off mood in certain corners of the market, partially offsetting the positive macro data.
Some analysts argue that Bitcoin’s relative weakness may be setting the stage for a catch-up rally if the macroeconomic environment continues to improve and institutional adoption trends resume their prior trajectory.
This article was adapted from BeInCrypto. Read the original here.
