The correlation between the price of Bitcoin and US stock prices, which reached an all-time high in 2022, appears to be fading. The decoupling may be a positive sign for Bitcoin, as it might suggest that the struggles of the US stock market are becoming less of a hindrance to the world’s largest cryptocurrency. CoinMetrics has reported that the 60-day Pearson correlation between Bitcoin and the closing price of the S&P 500 has fallen to its lowest level since April 2022. The correlation had reached a peak of 0.667 in September 2022, coinciding with the sharp drop in crypto and equity prices amid concerns about rising inflation and the US Federal Reserve’s response.

Since the start of the year, crypto has experienced a significant rally, with Bitcoin up by around 35%. In contrast, the S&P 500 has seen more modest gains of 4.0%. The decline in correlation between these two asset classes indicates that the ongoing bear market may be coming to an end. Prior to the lows in November, BTC had experienced a 77% drop from its record highs in 2021. However, the years before 2022, when Bitcoin’s correlation to US stocks was much weaker, were characterized by significant price gains. Bulls are hoping that a lower correlation between Bitcoin and stocks might indicate an upcoming bull market.

Despite ongoing pessimism about the outlook for US equities, Bitcoin may still rally this year, given a weaker correlation. However, the pullback in the BTC price from its recent highs above $25,000 has led some on-chain indicators related to Bitcoin market profitability to send a less bullish signal on the outlook for the cryptocurrency’s market cap. This has fueled concerns that Bitcoin could drop below $20,000 again in the near future.