It is a relatively rare phenomenon: While the stock market continues to experience record gains (the S&P 500 is up over 16% this year), Bitcoin and other cryptocurrencies continue to struggle, making it the first time the crypto and stock markets have split since 2014, Bloomberg reported.
That split, with Bitcoin down while stock markets soar, is somewhat unusual. On midday Friday, at the time of this writing, the digital cryptocurrency (BTC) was trading down over 4%, hovering around $88,945—far below its record high of over $125,000, but still above a recent low of $85,000 (down almost 30% from the high).
Here’s what to know.
Why is the split between crypto markets and stock markets unusual?
While Bitcoin is known for its volatility, historically, the digital currency and stocks have traditionally risen and fallen together.
So, why has there been a crypto sell off? What is contributing to the drop in investor confidence?
Some of what boosted confidence in the coin was the Trump administration’s early embrace of crypto, ushering in crypto-friendly regulations.
However, as Fast Company has previously reported, a few different micro and macroeconomic factors have started to spook investors, who are pulling back from the more volatile digital currency.
These factors include higher inflation; shifting interest rates; a dampening enthusiasm for AI-related stocks over fears of an AI bubble; and growing concerns over the widening gap between low-income and wealthy Americans, in what is shaping up to be a “K-shaped economy.”
Remind me, what exactly is Bitcoin, anyway?
Bitcoin is a type of cryptocurrency. Unlike a standard currency—such as the U.S. dollar or the European Union euro—it only exists in digital form and operates without government or banking oversight, traded peer-to-peer, making it harder to trace. Instead, Bitcoin uses a decentralized blockchain ledger to verify and securely record transactions.