What the first divergence of stock and bitcoin returns in 10 years means

Great breakups in recent years: Kanye and Kim. Tom Brady and Gisele. Angelina and Brad. J-Lo and A-Rod. Stocks and bitcoin?

That's right. You may not have realized that the last one is happening. But after a decade of bitcoin and stocks rising in the same years, the assets are diverging, like two ships passing in the night. Stocks are up a double-digit percentage in 2025, while bitcoin is in the red. (h/t Bloomberg for first noticing the stat.)

Given the fact that bitcoin was originally touted as a defensive store of value, the surprise might actually be that it's tracked the direction of stocks so closely over time. But the reality of the matter is that bitcoin evolved into a pure-play risk asset — something that benefits from rate cuts and other stimulative activity, the same as stocks.

The primary reasons for stock gains in 2025 are well-established at this point: the rise of the highly concentrated AI trade, the resumption of rate cuts, and tariffs not hurting as much as expected.

This divergence is really a discussion of why bitcoin hasn't been able to keep pace with equities.

An edition of First Trade last week dove into four main reasons for that, and I'll reiterate one that's deprived bitcoin of a crucial backstop: retail dip-buyers are in hiding. Their sentiment toward bitcoin has tanked, and that's being reflected in slowing ETF inflows.

It's also likely that red-hot precious metals like gold and silver — which both hit new records this year — have stolen some of the attention. Previously viewed as defensive safe havens, they've recently been rebranded as risk assets. (Sound familiar?)

But they haven't suffered the same weakness as bitcoin in recent weeks. The argument can be made that they've simply replaced bitcoin's role in portfolios, at least for now.

What the recent drawdown in bitcoin has likely done is flush out some of the weaker speculative hands. The people left holding it are the staunch long-term advocates, a big percentage of whom have probably owned it for a while.

If it can shake some of the bitcoin-specific overhangs — like possible forced selling by big institutional holders like Strategy — the king crypto could very well take its long-standing place alongside stocks, especially if rate cuts pan out as expected.

For now, however, the 10-year honeymoon is over.