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Bitcoin is undeniably having a great year, but is losing momentum just when it might have been expected to go up a gear.

Its traditionally strong and positive correlation with technology stocks, in particular the “mega tech” and growth stocks that have exploded higher in recent weeks, has completely broken down.

Bitcoin’s rolling 30-day correlation with the Nasdaq last week flipped to its most negative in six months, and its correlation with the NYSE FANG+TM index of mega tech and growth equity plunged to its most negative in nearly four years.

The recent burst of investor optimism that the boom in artificial intelligence (AI), ChatGPT software and advanced microchip technology will be transformational for economies is driving the surge in Big Tech.

Crypto might have been expected to ride on the coat tails, but hasn’t. Bitcoin peaked above US$31,000 in mid-April for a year-to-date gain of almost 90 per cent, but is now trading back at US$27,000, paring its 2023 gains to around 63 per cent.

As billions of dollars have flooded into Big Tech over the last six weeks, bitcoin trading volumes and demand have slumped.

Matt Weller, analyst at StoneX, says there just doesn’t seem to be a compelling reason to buy bitcoin right now and the AI boom still has legs.

“ChatGPT is what crypto wants to be – an instant-use, mass-market product with huge adoption rates,” he said, adding: “Crypto has lost its luster amid this gold rush. Or should I say, AI rush.”


Bitcoin, crypto assets more broadly and technology stocks have traditionally moved in tandem on the assumption that they will all be fundamental parts of the disruptive, growth-generating and efficient economies of the future.

Weller reckons the divergence really widened on April 25 when Microsoft was the first of the U.S. tech giants to report forecast-beating quarterly results.

Since April 25, the NYSE FANG+TM index of big tech and growth stocks has surged 24 per cent, nearly three times the broader Nasdaq. Bitcoin, on the other hand, is down around 1 per cent in more erratic trading.

Whatever is buoying mega tech is not floating bitcoin’s boat.

The AI boom has gathered momentum despite the rise in bond yields and discount rates. This has highlighted bitcoin’s underperformance and strongly suggests that outside the rarified world of Big Tech, investors are much more discerning.

Indeed, just seven U.S. tech stocks have driven all of the positive S&P 500 returns so far this year, according to analysts at Barclays.

Zooming out further, if bitcoin is the dollar hedge that its enthusiasts claim it to be, then it faces stiff headwinds from a “higher for longer” Fed and rising U.S. yields that are pushing the dollar higher again.


Analysts at retail trading research firm Vanda Research point out that while retail investors have only been “marginal” participants in the recent AI and tech boom, they have turned even cooler on crypto assets.

Their flows data show that rotation out of crypto stocks into AI names has pushed crypto inflows to the postpandemic lows, down to US$3.6-million a day from comfortably over US$10-million a day a few weeks earlier.

“Should AI stocks’ outperformance extend further, we anticipate retail traders will start chasing other names more aggressively … further reducing the demand for crypto names,” Vanda analysts wrote last week.

Vanda’s Marco Iachini said he is surprised cryptocurrencies have not followed tech higher. They will catch up at some point, but not before the AI rally broadens out to smaller cap tech and growth stocks first.

How much can bitcoin rally? Standard Chartered analysts reckon it could reach US$100,000 by the end of 2024. The so-called “crypto winter” may have passed, but it would require a dramatic turnaround in investor sentiment and crypto usage for that to become reality.

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