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The two distressed markets have exhibited a nearly identical correlation in recent months, yet they are trending in opposite directions on Thursday.
Bitcoin rally fades (geralt/Pixabay)
What to know:
- Bitcoin’s surge is experiencing a pause in U.S. trading on Thursday morning, with the price just above $71,000 after testing $74,000 a few hours earlier.
- The cryptocurrency market is declining despite the iShares Expanded Tech-Software Sector ETF (IGV) gaining more than 2%.
- Tomorrow will see the important U.S. jobs report for February as traders quickly reduce their expectations for any additional Federal Reserve rate cuts in the first half of 2026.
Bitcoin’s early-week rise began to diminish following the opening of U.S. markets on Thursday, causing a drop of nearly 2% over the past 24 hours to $71,400.
This shift corresponds with declines across broader equity markets as the conflict in Iran shows little indication of a swift resolution, pushing oil prices up by 5.3% to $78.70 per barrel. The Dow Jones Industrial Average has decreased by 1.4% and the S&P 500 by 0.7%.
The Nasdaq, however, is down only 0.4% as the previously struggling software sector experiences a significant rebound. The iShares Expanded Tech-Software Sector ETF (IGV) has increased by 2% and is now approximately 9% higher over the past five trading sessions.
This divergence is significant, as bitcoin has been closely associated with the software sector, both having declined together since October due to investor apprehensions regarding AI disruption, and recently both recovering from their lows in unison.
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IGV ETF vs. BTC (TradingView)
New bull or bear market bounce?
Bitcoin “isn’t out of the woods yet,” remarked Arthur Hayes, CIO of Maelstrom, emphasizing that despite the rise to $74,000, the correlation with the IGV ETF persists. Whether the decoupling observed on Thursday will be sustained is uncertain, but the rise in software stocks while bitcoin declines is not the scenario crypto bulls anticipated. “It could be a dead cat bounce,” Hayes added.
Traders may also be opting to take some profits ahead of Friday’s critical U.S. jobs report for February. Recent economic data has largely exceeded expectations, reducing the likelihood of a resumption of Federal Reserve rate cuts.
Interest rate traders at the Chicago Mercantile Exchange currently anticipate an 88% probability that the Fed will maintain rates not only at the upcoming meeting this month but also in April. A month ago, these odds stood at 59%.
“We’re cautiously optimistic, but the geopolitical risks necessitate caution,” stated Bryan Tan, a trader at Wintermute. He noted that improving inflows into spot bitcoin exchange-traded funds (ETFs), which have seen nearly $2 billion in inflows in just the past week, alongside stabilizing trading volumes, are bolstering the market, while a muted response to disruptions around the Strait of Hormuz may provide room for bitcoin to advance toward the $74,000-$75,000 range.
Analysts at Bitfinex indicated that there has been a “notable increase in spot market strength,” suggesting that the recent upward movement was propelled by market buyers rather than speculative leverage.
“We believe there is a chance of relief in the coming weeks and months if this trend continues,” they concluded.
