Bitcoin falls following $1 trillion exodus from stock market

• The US stock market lost more than $1 trillion in market value following the poor performance in the Magnificent 7.
• Bitcoin showed a positive correlation with the stock market, trading in a daily loss alongside several other cryptocurrencies.
• The new stablecoin inflows have yet to be allocated, says analyst CryptoQuant.

Bitcoin (BTC) fell more than 2% on Tuesday after the US stock market posted significant losses. The decline resulted in the overall cryptocurrency market posting a 3.6% loss amid negative sentiment surrounding BTC’s historically weak returns since September.

Bitcoin and crypto market fall on US stock market loss

The US stock market extended its losses on Tuesday after wiping $1.05 trillion from its market value. In particular, Magnificent 7 stocks, which include Apple, Nvidia, Amazon, Meta, Microsoft, Alphabet and Tesla, lost more than $550 billion in their market capitalization in the past 24 hours, according to The Kobeissi Letters.

A similar trend is visible in the crypto market, where Bitcoin and several other cryptocurrencies in the top 20 are trading at a daily loss. The move underscores Bitcoin’s growing correlation with the traditional stock market. Unlike earlier times, when investors often switched to Bitcoin for uncorrelated exposure, the influx of traditional investors into the crypto market – especially with the launch of Bitcoin ETFs – has changed the narrative.

Crypto market performance

Bitcoin’s decline also aligns with its historically poor performance in September, showing that it was Bitcoin’s worst month ever, with a mean and median loss of -4.5 and -4.35 respectively – no other month had a lower average return.

BTC Monthly Performance

The same trend is visible in the S&P 500, which records September as its worst month in 30 years.

The recent price drop comes despite an increase in the supply of stablecoins in the crypto market, which is a bullish trend. As a result, one CryptoQuant analyst believes that most of the new capital has yet to be allocated.

“Much of the capital that is allocated to stablecoins remains without buying pressure on the order book, but this ‘firepower’ could hit the market at any time,” the analyst said. “Institutional investors may buy digital assets through TWAP or algorithmic orders to reduce short-term price impact,” he added.

Meanwhile, Bitcoin’s recent weak price action has seen Meta shares and gold rise to challenge its outperformance as the second best asset for risk-adjusted returns.

The BTC MVRV Z-Score also crossed a red bar, indicating a dominant bearish sentiment. A prolonged period in which this metric remains red could signal the beginning of a bear market.