does the crypto market follow the stock market?

Does the crypto market follow the stock market?

Short answer: the relationship is time‑varying and conditional — crypto sometimes moves with equities, sometimes behaves independently. This article explains what we mean by "does the crypto market follow the stock market" and walks through definitions, empirical methods, historical episodes, drivers of co‑movement and decoupling, market‑structure links, risks for financial stability, and practical implications for investors and portfolio managers. You will learn when and why the crypto market follows the stock market, when it can diverge, which measurements researchers use, and where to find reliable data.

As of January 22, 2025, Benzinga reported notable market events that reflected growing institutional ties between crypto infrastructure and public markets; as of late 2025–early 2026, regulatory commentary from industry legal experts (GSR) indicated clearer market‑structure direction in the United States. These dated reports help set the recent context for the crypto–stock relationship.

Definitions and key concepts

To answer "does the crypto market follow the stock market" consistently we must be precise about terms.

• Correlation: a statistical measure (commonly Pearson correlation) of how two assets move together. Correlation ranges from −1 (perfect opposite movement) to +1 (perfect same direction). Correlation does not imply causation.

• Causation / spillover / contagion: causation means one market's moves help cause another’s moves; spillover refers to volatility or returns transmitting across markets; contagion denotes stressed transmission during crises.

• Rolling correlation: correlation computed over a moving window (e.g., 30‑, 90‑, or 180‑day) to capture time‑varying relationships.

• Granger causality: an econometric test used to see whether past values of one series help predict another.

• Volatility spillover metrics: measures (e.g., Diebold‑Yilmaz framework) that quantify how volatility transmits across assets or markets.

• Risk‑on / risk‑off: investor regimes. In risk‑on periods, investors buy higher‑risk assets (equities, crypto); in risk‑off, they sell risk assets and buy safe havens.

• Diversification: holding assets with low correlation to reduce portfolio volatility.

• Relevant asset classes in this article: Bitcoin (BTC), Ethereum (ETH), broad crypto market indicators (total crypto market cap), and major equity indices such as the S&P 500 and Nasdaq 100.

Historical evolution of the crypto–stock relationship

Understanding whether the crypto market follows the stock market requires a historical lens: the relationship has evolved through identifiable phases.

1. Early years (pre‑2020): low systematic correlation. In Bitcoin’s first decade and the early altcoin era, crypto often behaved idiosyncratically. Events like protocol upgrades or exchange incidents drove crypto moves more than macro news. Correlations with broad equities were often near zero on monthly horizons.

2. COVID shock and 2020–2021 bull market: increased co‑movement. During the March 2020 liquidity shock and the subsequent macro easing and stimulus era, crypto and equities fell sharply in sync and then rallied together during the 2020–21 risk‑on cycle. Institutional interest, macro liquidity, and new investment vehicles increased co‑movement.

3. 2022 industry crisis and episodic divergence: crypto‑specific shocks (major insolvencies and a high‑profile exchange collapse in 2022) produced episodes where crypto fell much more than equities, showing that idiosyncratic contagion can break the link.

4. ETF approvals and 2024–2025: deeper market integration. The arrival of spot crypto ETFs and larger institutional adoption increased cross‑market links. Many studies and market commentators reported an overall rise in correlation through 2024, but rolling measures continued to show time variation and occasional decoupling.

5. Early 2026 regulatory and market‑structure developments: as of late‑2025 and early‑2026, industry and policy reporting signaled clearer frameworks for market structure, token classification and liquidity provision. These developments affect whether, and how, the crypto market follows the stock market going forward.

Each phase reflects both macro economic drivers and crypto‑specific institutional changes. That combination is why the answer to "does the crypto market follow the stock market" is not static.

Empirical evidence and measurement

Researchers and market analysts use several tools to assess whether the crypto market follows the stock market. Key methods include:

• Pearson/product‑moment correlations (daily, weekly, monthly).
• Rolling correlations (e.g., 30‑, 90‑, 180‑day windows) to capture changing relationships.
• Granger‑causality tests to detect predictive lead‑lag behavior.
• Volatility spillover indices (Diebold‑Yilmaz framework) to measure how shocks transmit.
• Multivariate GARCH models to study time‑varying conditional correlations.
• Event‑study analysis for crisis episodes (e.g., March 2020 or 2022 exchange collapses).

Typical empirical findings across summaries from IMF, S&P Global, Bloomberg and academic papers:

• Correlations are time‑varying. Periods of elevated macro stress or synchronized liquidity moves show higher positive correlations.
• On average, correlations between major crypto (Bitcoin) and broad equity indices range from weak to moderate, but can spike in times of stress.
• Frequency matters: daily correlations often show more short‑term co‑movement than monthly correlations, and intra‑day dynamics can differ.
• Different crypto–equity pairs show different strengths: Bitcoin vs Nasdaq often shows stronger co‑movement than smaller altcoins vs broad indices.

Sources: IMF (2022) analysis that noted rising sync during some periods; S&P Global (May 2023) reporting on macro correlations; Bloomberg coverage (April 2025) documenting signs of recent breakdowns in correlation; academic literature documenting the conditional nature of the link.

Typical correlation statistics and examples

• Early years: near‑zero to low positive correlations (monthly correlations often <0.2).
• 2020–2021 bull cycle: moderate positive correlations (daily correlations in some windows reached 0.3–0.6).
• Crisis episodes: correlations can spike (synchronous sell‑offs) or collapse (crypto idiosyncratic crashes). For example, the March 2020 crash showed a rapid synchronous decline; the 2022 crypto‑industry collapse produced much larger downside moves in crypto than in equities, reducing correlation in some windows.

Important caveats: numeric ranges depend on sample window, time frequency, and which crypto and equity series are compared.

Drivers that link crypto and stock markets

Several mechanisms create co‑movement between crypto and stocks. These drivers explain why at times the answer to "does the crypto market follow the stock market" can be "yes, to some degree":

• Macroeconomic conditions: monetary policy, inflation expectations, and real yields shape the valuation of risk assets. Tighter policy (higher rates) tends to pressure both equities and many cryptocurrencies; easier policy supports risk assets.

• Investor risk appetite: large shifts in risk‑on/risk‑off sentiment cause synchronized flows into or out of risk assets.

• Institutional adoption and ETFs: the introduction of regulated spot ETFs and institutional custody links crypto to the traditional asset‑management ecosystem. Large flows into ETFs create correlations with equity flows and index reallocations.

• Portfolio rebalancing: multi‑asset managers that include crypto alongside equities can trigger simultaneous buying or selling across both asset classes.

• Liquidity and leverage dynamics: margin calls, forced deleveraging, and cross‑collateralized positions can transmit shocks between markets.

• News and macro headlines: broad market news (bank stress, rate surprises, geopolitical risk) can provoke synchronized reactions across both markets when investors treat crypto as another risk asset.

• Market microstructure: derivatives markets (futures, options) that are traded by institutions can cause correlated moves across cash and derivative positions.

These drivers are often simultaneous. When macro drivers dominate, crypto tends to move more like equities; when crypto‑specific drivers dominate, the link weakens.

Factors producing decoupling or idiosyncratic crypto moves

Crypto markets have several attributes that allow them to break from equities.

• Protocol‑ or project‑level news: hacks, governance failures, or major protocol upgrades can move specific tokens or the entire market independently.

• Exchange or custodial failures and industry contagion: insolvency or fraud at a central market participant can produce crypto‑only crises.

• Stablecoin stress: runs on stablecoins or redemption squeezes can ripple across crypto liquidity without directly affecting equities.

• Regulatory actions targeted specifically at tokens, trading venues, or token listings can create idiosyncratic downward pressure unrelated to equities.

• Token economics and supply events: scheduled issuance changes (e.g., Bitcoin halvings), protocol token unlocks, or token burns can produce supply shocks.

• Narrative‑driven flows: social or on‑chain narratives (DeFi TVL changes, NFT mania) can drive large capital shifts within crypto alone.

When these crypto‑specific forces are strong, answers to "does the crypto market follow the stock market" lean toward "no — crypto can and does decouple." Historical examples include 2022 industry contagion episodes where crypto drawdowns greatly exceeded equity declines.

Sectoral and cross‑asset linkages

Not all equities link to crypto equally. Certain sectors and listed companies have stronger ties:

• Crypto infrastructure firms (custody, miners, exchange operators listed on public markets) naturally track crypto prices and can amplify stock–crypto linkages.

• Semiconductor and data‑center firms that supply mining hardware or cloud compute for crypto services may show correlated moves with crypto cycles.

• ETFs and funds that hold both crypto infrastructure equities and crypto assets can create mechanical links.

• Derivatives and OTC desks used by multi‑asset managers can transmit price and liquidity shocks across markets.

Stablecoins and crypto derivatives serve as plumbing that can move liquidity in and out of crypto quickly; degraded liquidity here can produce sharp crypto moves with limited immediate equity impact, or conversely, stressed equities can reduce cross‑market liquidity for crypto as institutions withdraw capital.

Market structure and institutional integration

A key reason the crypto–stock relationship changed is market structure:

• 24/7 trading vs market hours: crypto trades continuously while equities have set hours. This difference can blur lead‑lag analyses and produce apparent overnight decoupling when equities are closed.

• Spot ETFs, regulated custody, institutional prime services, and listed crypto infrastructure firms integrate crypto into regulated markets. As institutions allocate across these vehicles, portfolio and trading flows become more correlated with equity markets.

• Derivatives: growth in crypto futures and options denominated in exchange‑traded products increases arbitrage and hedging activity that links price discovery between cash and listed products.

• Liquidity provisioning: professional market makers operating across asset classes can transmit liquidity shocks. Regulatory clarity matters here: as industry commentators noted, clearer onshore rules encourage market‑making and deeper liquidity, which may either increase co‑movement (through shared liquidity providers) or reduce volatility (by making markets more resilient).

As Joshua Riezman (GSR) and industry commentators observed in late‑2025 commentary, a clearer market‑structure framework and functional token classification would encourage onshore liquidity providers — a structural development that bears on whether the crypto market follows the stock market in future episodes. (As reported in industry coverage of regulatory outlooks for 2026.)

Risks, contagion and financial stability implications

Institutions that monitor systemic risk (IMF, S&P Global, central banks) emphasize that higher correlations between crypto and equities reduce the diversification benefits of holding both and can amplify systemic volatility. Key points:

• When correlations rise, shocks to one market (e.g., a large equity repricing) can pass to crypto through common holders, margin channels, or liquidity providers.

• Crypto is still smaller in nominal size than global equity markets, but growing institutional positions (ETF AUM, custody flows) increase the potential for meaningful spillovers.

• The presence of leveraged positions and off‑exchange liquidity pools means sudden price moves in crypto can cause margin cascades that affect broader financial intermediaries where exposures are shared.

• Regulatory agencies have noted that conditional contagion risk exists: a severe crypto sector event could impair liquidity and confidence in broader financial markets, especially through shared counterparties or when tokenized real‑world assets are involved.

Policy implications center on monitoring concentrations of exposure, ensuring robust custody and settlement practices, and clarifying rules for market‑making and token classification to bolster onshore liquidity.

Implications for investors and portfolio construction

If you are evaluating whether the crypto market follows the stock market, practical consequences follow:

• Diversification limits: when correlation rises, crypto offers less volatility dampening in mixed portfolios. Investors should not assume low correlation is permanent.

• Risk management: use position sizing, stop‑losses, portfolio stress tests, and scenario analysis that assume conditional correlation spikes during stress.

• Dynamic allocation: consider time‑varying allocation frameworks or volatility‑target strategies that adapt to measured rolling correlations.

• Hedging: options and futures in regulated venues can help hedge exposures, but hedging costs and liquidity conditions change over time.

• Short‑term trading vs long‑term allocation: short‑term traders must monitor intraday cross‑market signals; long‑term allocators should consider fundamental differences (supply schedule, use cases) and not rely solely on recent correlation patterns.

• Due diligence: evaluate custody, counterparty risk, and the instruments used (ETFs, spot holdings, tokenized assets) — prefer regulated service providers. For trading and custody needs, Bitget and Bitget Wallet offer institutional‑grade custody and product suites tailored to regulated participation (note: this is a platform mention, not investment advice).

Remember: correlation estimates are backward‑looking and sensitive to the measurement window; risk frameworks should be forward‑looking and scenario‑based.

Methodological caveats and research limitations

Studies of the crypto–stock relationship face several challenges:

• Nonstationarity: price series often have changing means and variances, complicating standard correlation interpretation.

• Heteroskedasticity and volatility clustering: crypto volatility is higher and more clustered, biasing simple correlation estimates.

• Sample selection bias: choice of start/end dates, assets, and data frequency strongly affects results.

• Frequency effects: daily vs monthly vs intraday correlations can tell different stories.

• Correlation vs causation: statistical linkage does not prove one market causes the other — shared external drivers are often at work.

• Microstructure effects: differences in trading hours and liquidity can create measurement artifacts.

Robust research checks use multiple methods (rolling windows, multivariate GARCH, spillover indices, event studies) and report sensitivity to choices of window length and frequency.

Recent developments and notable episodes (selected timeline)

• March 2020 (COVID‑19 liquidity shock): crypto and equities fell sharply in sync, highlighting that in severe systemic stress, correlations spike. Many studies use this episode to demonstrate synchronized risk‑off selling.

• 2020–2021 bull run: macro liquidity, retail and institutional flows, and new custodial/investment products increased co‑movement between major cryptocurrencies and equity indices.

• 2022 crypto‑industry crises: high‑profile firm failures and an exchange collapse produced pronounced crypto drawdowns that outpaced equities and temporarily reduced the measured correlation across some windows.

• 2023–2025 ETF rollouts and institutional adoption: the availability of spot ETFs and increasing institutional custody deepened links between crypto and traditional finance. As of early 2026, reporting noted spot ETF assets and options activity had become meaningful drivers of trading flows. For example, industry reporting indicated that in early 2026 spot Bitcoin ETF assets were in the low‑hundreds of billions aggregate (as reported in market coverage through January 2026).

• April 2025: Bloomberg and other markets outlets documented episodes where Bitcoin’s correlation with stocks showed signs of weakening in rolling windows even as structural integration increased; this underscores the time‑varying nature of the link.

• January 22, 2025: the public listing and first‑day performance of a major crypto custodian company reinforced the narrative of convergence between public markets and crypto infrastructure (as reported on that date by market news outlets).

Note: dates and reporting are cited to provide context and are correct as reported by major market coverage in the periods cited above.

Data sources and further reading

Empirical work and market commentary typically rely on:

• Crypto price aggregators and on‑chain metrics (e.g., market cap, daily volume, active addresses, staking and TVL metrics).
• Exchange and custody reports and filings (institutional flows, ETF AUM, options open interest).
• Equity market indices (S&P 500, Nasdaq 100) and sector indices.
• Research from IMF (2022 blog/report on crypto–stock spillovers), S&P Global (May 2023 macro correlation piece), Bloomberg reporting (2024–2025), academic working papers on time‑varying correlations, and market‑research notes from prime brokers and trading firms.

For practical portfolio work, use reputable market data providers, exchange‑level liquidity snapshots, and custody reporting. When comparing crypto to equities, consistently document sample windows, frequency, and assets compared.

Conclusion: how to read the evidence

Answering "does the crypto market follow the stock market" requires nuance: the relationship is conditional, time‑varying, and sensitive to structural changes. Empirical evidence shows that sometimes the crypto market follows the stock market — especially during macro‑driven risk‑on/risk‑off episodes and as institutional adoption increases — but crypto retains many idiosyncratic drivers that enable divergence. Investors and policymakers should therefore treat the linkage as conditional, monitor rolling correlations and liquidity conditions, and not assume a fixed relationship when building portfolios or assessing systemic risk.

Further exploration: consider tracking rolling 90‑day correlations between Bitcoin and the S&P 500, monitoring ETF inflows and options open interest, and following on‑chain metrics (active addresses, stablecoin supply) to detect when crypto‑specific stresses might cause decoupling. For custody or trading services that support institutional participation, explore regulated, professional offerings such as Bitget and Bitget Wallet to help manage operational and custody risks.

References and notable studies (selected)

• International Monetary Fund (IMF) — analysis and blog posts on crypto market linkages and spillovers (2022).
• S&P Global — "Are crypto markets correlated with macroeconomic factors?" (May 2023).
• Bloomberg — reporting on evolving Bitcoin–stock correlations (notably coverage in April 2025 and subsequent pieces).
• Industry commentaries on U.S. regulatory outlook and market‑structure themes by legal and strategy officers (e.g., GSR commentary in late 2025 / early 2026).
• Academic working papers on time‑varying correlation, Granger causality, and volatility spillovers between crypto and equities.

(Select items above are representative; readers should consult the original reports for detailed empirical tables and methodologies.)

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