Bitcoin falls after Dow sees best streak since 2017. Bad sign for cryptos.

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Bitcoin and other cryptocurrencies slid on Friday as digital assets continued to underperform the stock market in what could be a worrying sign for crypto sentiment.

The top Bitcoin sellers in recent days have been short-term investors, said Alex Kuptsikevich, an analyst at brokerage FxPro, citing data from crypto market intelligence group Glassnode. They have been preparing to take profits for several weeks. Long-term investors who have held the cryptocurrency for more than 12 months are in no rush to join the sellers.

Market data suggests that fickle sellers are keeping crypto prices under pressure, a departure from action in the stock market, where animal spirits and positive sentiment have driven stocks higher in recent weeks. While cryptos and stocks are different, and true Bitcoin bulls celebrate the decoupling of token and stock prices, both are fundamentally risk-sensitive assets and have shown similar dynamics this year against the backdrop of the interest rate outlook and recession risk.

The Dow Jones Industrial Average posted its longest winning streak since 2017 on Thursday, and the S&P 500 is up around 4% over the past month while Bitcoin has lost 1% over the same period. The tech-heavy Nasdaq is most correlated with crypto as it fell 2.1% on Thursday, which may have weighed on digital assets, but futures following the index rallied on Friday and it has consistently outperformed Bitcoin for several recent periods.

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The generally more volatile bitcoin is unlikely to overtake the Nasdaq on the downside and lag on the upside.

Bitcoin failed to build local upward momentum and continues to test the lower boundary of its last trading range, Kuptsikevich said. A failure below opens the door for a deeper correction to $28,900.

Bitcoin’s underperformance is concerning amid strong catalysts. The cryptos were backed by BlackRock (ticker: BLK) and other financial giants made spot Bitcoin exchange-traded fund (ETF) deposits, which took Bitcoin back above $30,000 in June. Last week, a pro-crypto court ruling sent Bitcoin to its yearly high. Yet neither catalyst has helped prices sustain high levels.

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Of course, regulatory uncertainties continue to loom over crypto and weigh on prices, but signs that the prevailing trend is down in a historically quiet market as stocks surge higher do not bode well. Although long-term holders may be steadfast, they alone cannot support prices, and positive sentiment among short-term traders is needed to rekindle momentum.

Beyond Bitcoin, Ether is the second largest 1% cryptofell under $1,900. Smaller cryptos, or altcoins, fared less well, with Cardano down 3% and Polygon down 2%. Memecoins were more mixed, with Dogecoin up 1% and Shiba Inu losing 1%.

Write to Jack Denton at [email protected]

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