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Concerns are rising that software stocks may be encountering a fundamental threat due to the emergence of AI, and according to one analyst, Bitcoin is fundamentally open-source software.
BTC vs IGV (TradingView)
Key points:
- According to ByteTree Research, the correlation of Bitcoin with the iShares Expanded Tech Software ETF (IGV) has increased to 0.73.
- Another analyst suggested that Bitcoin, at its essence, is merely open-source software, which might make it vulnerable to the AI challenges confronting software stocks.
Bitcoin is increasingly mirroring the behavior of software stocks, with its recent correction occurring in tandem with the wider software market decline.
The link between Bitcoin and software equities has notably strengthened. On a 30-day rolling average, Bitcoin’s correlation with the iShares Expanded Tech Software ETF (IGV) is at a significant 0.73, as per ByteTree. The IGV has experienced a decline of approximately 20% year to date, while Bitcoin has decreased by 16%.
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The IGV is significantly composed of software and services companies such as Microsoft (MSFT), Oracle (ORCL), Salesforce (CRM), Intuit (INTU), and Adobe (ADBE).
While the technology sector seems relatively robust at a high level — the Nasdaq 100 (QQQ) is only about 4% below its peak — software stocks have endured the majority of the selling pressure, and Bitcoin is increasingly aligning with this weaker segment of the market instead of the broader index.
The primary reason for the decline in software stocks is straightforward: AI. The swift advancements towards fully realized artificial general intelligence (AGI) are currently viewed as a critical challenge for the software industry.
“There is no denying that Bitcoin has been affected by the tech selloff,” stated ByteTree. “Essentially, Bitcoin is an internet stock. Software stocks have been the latest victims, and Bitcoin’s price has exhibited similar trends over the past five years, with a strong correlation.”
ByteTree also highlights that the average duration of a technology bear market is approximately 14 months. With the current downturn commencing in October, this indicates that pressure may persist well into 2026. However, ByteTree points out that a resilient economic environment could lend support to Bitcoin.
“Bitcoin is simply open-source software,” remarked Matthew Sigel from Van Eck.
