This week's market review and outlook: Bitcoin reaches new highs, trend stabilizes at $110,000.
Last week, Bitcoin finally broke out of a narrow trading range, surpassing a resistance level of $109,000 maintained for a month, and reached a new high of $118,000. The reasons behind this trend are varied, but the fuse was undoubtedly the delay in the tariff negotiation deadline, followed by the dovish signals released in the FOMC meeting and reports that the Shanghai State-owned Assets Supervision and Administration Commission held a central group study meeting on July 10 to discuss cryptocurrencies and stablecoins, as well as news regarding Powell considering resigning, all serving as fuel for the rise of the cryptocurrency market.
Influenced by a series of positive news, Bitcoin finally exited a downward trend maintained for nearly two weeks on the daily chart, returning to an upward trend and establishing $110,000 as a new support level. As long as it does not fall below this level and then test $108,000 in the short term, the upward trend of Bitcoin can be considered established.
But it is worth noting that this trend is mainly driven by futures, with no significant increase in spot ETF inflows, indicating that the market remains skeptical about this trend. However, if the upward trend continues next week and the spot market follows, the probability of Bitcoin breaking through $120,000 or higher will be very high.
Tariff negotiations and CPI data will impact this week's trend.
This week, the key economic data for the U.S. to watch is the CPI figure for June to be released on Tuesday. The market currently expects CPI to increase, indicating that inflation will heat up, as June reflects the first wave of impact on inflation after the implementation of U.S. tariff measures. If this time, like in the past few months, it comes in below expectations, it would indicate that inflation is indeed cooling down, and there should be no doubt about the Federal Reserve lowering interest rates in September, which will continue to stimulate market optimism.
More concerning is the tariff negotiation issue, as over the weekend, Trump announced a tariff of 30% on the EU, higher than analysts' expectations, causing market worries about whether the tariff issue will worsen. At the same time, important U.S. trading partners such as Japan and South Korea still have grievances regarding tariff conditions, so before the August 1 deadline, trade relations could change at any time, affecting market investment sentiment. Currently, the postponed negotiation deadline simply pushes uncertainty to August.
"The demise of the 'hedge asset' positioning? Why have cryptocurrencies begun to mirror the U.S. stock market and no longer follow an independent trend?"
In recent years, especially since 2024, the correlation between cryptocurrencies and the U.S. stock market has become an undeniable phenomenon in the market. Now, even when analyzing the rise and fall of cryptocurrency prices, it is necessary to reference U.S. economic policies and stock market trends.
The previous independent trend of the cryptocurrency market, as a global economic hedge asset, has gradually faded. Why has this development occurred? This article will analyze the six core driving factors behind this interconnection based on the latest market data and expert insights, providing investors with clear decision-making references.
With institutional capital flowing into Bitcoin and optimistic regulatory expectations, the cryptocurrency reached a historical high of $118,000, while the S&P 500 index, representing the U.S. stock market, also recorded a solid growth of about 7% year-to-date, leading to increasingly frequent synchronized fluctuations between the two markets.
Cryptocurrencies were once seen as independent hedge assets outside traditional finance, but now their price movements are highly correlated with the stock market, especially during periods of economic uncertainty. Here are six key factors driving this correlation:
I. Investor behavior and market sentiment alignment.
Investors are increasingly viewing cryptocurrencies as risk assets similar to stocks, leading to synchronized price movements in both. Market optimism tends to push both asset types upward, while pessimism triggers simultaneous declines.
For example, in October 2023, a false rumor about the SEC approving a spot Bitcoin ETF caused Bitcoin's price to surge nearly $2,000 within hours, reflecting investors' expectations and reactions similar to the stock market.
Data evidence: As of July 2025, Bitcoin has risen 15% year-to-date, outperforming the S&P 500 index by 7%, indicating that both share a similar foundation of investor sentiment.
Core impact: The classification of cryptocurrencies as risk assets means their prices are more likely to follow stock market trends, particularly during periods of significant market volatility, which greatly weakens their traditionally recognized asset diversification benefits.
II. Shared macroeconomic impacts
Cryptocurrencies and stock markets are both profoundly influenced by macroeconomic factors, which is the fundamental reason for their correlation.
Interest rates: Historical data shows that changes in interest rates have a significant impact on both. In May 2022, when the Federal Reserve announced an interest rate hike, Bitcoin promptly fell to around $31,000, while the Nasdaq 100 index also plummeted by about 1,400 points. Since 2017, the correlation between the S&P Cryptocurrency Broad Digital Market Index (S&P BDMI) and the 2-year Treasury yield has been -0.33, indicating a negative correlation.
Money supply (M2): Since 2017, the correlation between M2 and S&P BDMI has reached as high as 0.75, indicating that loose monetary policy tends to raise both markets simultaneously.
Dollar strength: The dollar index has a -0.16 negative correlation with S&P BDMI. A strong dollar typically puts pressure on risk assets priced in dollars.
Market volatility: Cryptocurrency prices show a -0.20 negative correlation with the VIX volatility index (fear index). This indicates that during high volatility (market panic) periods, cryptocurrencies face sell-off pressure like stocks.
III. Institutional funds entering the market and ETF fund flows
The continued entry of institutional investors is a key catalyst for tightening the link between cryptocurrencies and traditional financial markets. As of July 3, 2025, the annual net inflow of spot Bitcoin ETFs has reached $14.4 billion. On July 10 alone, Bitcoin ETFs experienced a massive inflow of $1.18 billion, while Ether ETFs also saw an inflow of $383 million. These funds will deeply integrate cryptocurrencies into a broader financial ecosystem.
Case study: By 2025, the number of publicly traded companies using Bitcoin as a reserve asset to hedge against inflation has significantly increased, further tying the fate of cryptocurrencies to corporate stock strategies.
Core impact: Institutional adoption has broken the isolation of the crypto market, making it more aligned with stock market trends during large-scale buying or selling by institutions.
IV. Regulatory developments and policy outlook
The clarity or uncertainty of regulatory policies has a significant impact on investor confidence in both markets.
Positive drivers: On January 11, 2024, the SEC approved the first spot Bitcoin ETFs, directly driving Bitcoin's price from around $50,000 to over $75,000 in March of the same year. This market reaction pattern is similar to how the stock market reacts to positive policies. By July 2025, the U.S. House of Representatives is set to debate several cryptocurrency-friendly bills, and with former President Trump's pro-crypto stance further boosting market confidence, it has become a catalyst for Bitcoin to break through $100,000.
Negative impact: On April 12, 2025, Trump announced reciprocal tariffs on countries worldwide, which not only severely impacted the U.S. stock market but also caused Bitcoin to briefly fall below $76,000. Similarly, during the U.S. intervention in the Iraq War, Bitcoin also fell below $100,000, reflecting the close relationship between cryptocurrencies and the U.S. economy.
V. Economic uncertainty and the linkage of risk assets.
During periods of economic recession or heightened uncertainty, cryptocurrencies tend to behave more like risk assets rather than safe havens.
Data evidence: According to Newhedge data, the correlation coefficient between Bitcoin and the S&P 500 index has jumped from 0.01 during 2017-19 to 0.36 during 2020-21. By early 2025, the 30-day rolling correlation between the two has frequently exceeded 70% over the past five years.
Market validation: The COVID-19 pandemic triggered an economic recession in 2020, leading to a stock market crash, and cryptocurrencies were no exception. In March 2023, the correlation between Bitcoin and Nasdaq relative to the S&P 500 reached 0.89, indicating a high overlap in trends with high-risk assets like tech stocks.
VI. Increasing connectivity and contagion risks.
As cryptocurrencies are integrated into the traditional financial system, the connectivity between markets has increased, raising contagion risks. Research by the International Monetary Fund (IMF) indicates that during the 2020-21 period, the spillover effect between Bitcoin and the S&P 500 index significantly increased. Bitcoin's volatility can explain about one-sixth of the fluctuations in the S&P 500 index, and vice versa.
Core impact: This means that a shock in one market (such as the market crash in March 2020 or the Bitcoin price shock in early 2021) can easily transmit to another market, driving synchronized fluctuations and forming a positive feedback loop.
Conclusion: Inextricably linked to Wall Street.
In summary, the high correlation between cryptocurrencies and the U.S. stock market is no longer a short-term coincidence but is shaped by institutionalization, macroeconomic linkages, and regulatory integration, creating a new market norm. The narrative of Bitcoin as 'digital gold' or an independent hedge asset is facing severe challenges in the current environment, with its risk diversification function in investment portfolios gradually weakening.
For investors, this means that the era of independently assessing the cryptocurrency market is over. Future investment decisions must place it within the broader framework of global risk assets, adopting macro perspectives and risk management strategies similar to those used in analyzing traditional stock markets. Therefore, it must be acknowledged that the fate of cryptocurrencies is now inextricably linked to Wall Street.
Last week's review >>> 【MICA RESEARCH】 "The Big and Beautiful Act" will ignite a bull market in the second half of the year but may trigger a bear market in 2026.
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"【MICA RESEARCH】The demise of the 'hedge asset' positioning? Why have cryptocurrencies begun to mirror the U.S. stock market and no longer follow an independent trend?" This article was first published on (Blockcast).
