A correlation is starting to emerge between BTC and the S&P 500 Index

Since the November 5 election of Donald Trump to the presidency of the United States, Bitcoin (BTC) has risen by about 47%, sharply outperforming the S&P 500’s 4% advance.

The incoming president has, of course, made clear how friendly he is toward Bitcoin and cryptocurrencies. Also noteworthy is the Republican sweep of the Senate and House of Representatives, where laws that may affect cryptocurrencies will eventually be passed.

Andrei Dragosh, Bitwise’s head of research in Europe, spoke exclusively with CoinDesk about other factors influencing the divergence between Bitcoin and stocks.

“My view on bitcoin versus the S&P 500 is that the stock market was negatively impacted by the Fed’s hawkish interest rate cut in December,” Dragosh said. “The Fed has revised its planned 2025 interest rate cuts to just two rate cuts, which is less than previously announced and also less than what traditional financial markets had previously expected.”

Meanwhile, the DXY index, which measures the value of the US dollar against a basket of major currencies, rose 5%, adding pressure on risky assets. This would normally involve damage to Bitcoin, but Dragosh explains that it has held up relatively well thanks to other factors, including a persistent shortfall in the supply of Bitcoin on exchanges. He continued: “Bitcoin exchange balances continued to decline despite profit taking.”

However, recently, Bitcoin and the S&P 500 have begun to move closely together again, with their correlation reaching 0.88 (with no correlation starting at 0 and absolute correlation starting at 1) over the most recent 20-day moving average, they show. TradingView data.

“While on-chain factors are likely to provide significant tailwinds at least through mid-2025, a deteriorating macro picture could pose short-term risks for Bitcoin as well, especially given the still relatively high correlation with the S&P 500.” ,” concluded Dragosh.