One big difference currently is the definition of this market cycle.
Capital rotation into risky assets remains extremely aggressive. All major US stocks just ended the week at new all-time highs.
The market is essentially brushing aside every macro newsletter, from the Iran conflict and Strait of Hormuz risks to persistent inflation and the Fed story.
But none of that has been enough to break the momentum. In just eight weeks, the S&P 500 is up +18%, while the Dow Jones continues to hit new all-time highs.
Crypto, meanwhile, is clearly underperforming. The overall crypto market is up just 10%, with most major assets still trading well below previous cycle highs.
In that context, publicly celebrating US President Donald Trump’s stock market rally feels almost symbolic of where capital is currently flowing. A deeper rotation from crypto to traditional assets therefore seems like something the market has already started.
And the timing couldn’t be much worse for digital assets.
Macro volatility is already weighing heavily on crypto sentiment. As AMBCrypto previously reported, the SEC has effectively halted its long-awaited “innovation exemption” proposal, which could have accelerated institutional adoption of US-based tokenized stocks.
Against that backdrop, stronger capital flows into US equities could further weaken liquidity conditions for crypto.
The strength of the stock markets can still support crypto risk sentiment
The crypto market has clearly returned to a risk-free environment.
From a technical point of view, this follows that of Bitcoin [BTC] almost 10% correction in less than two weeks, with the price losing the $77,000 level.
More importantly, the market still doesn’t look complete and capitulation risk continues to rise after the last broad market flush.
It is striking that this shift is now also clearly visible in the positioning and sentiment. Nearly $60 billion has left crypto, confirming a broader return to risk-taking behavior.
At the same time, the Crypto Fear & Greed Index has fallen back into the ‘fear zone’, marking the sharpest pullback since early April.
Against that backdrop, the continued capital rotation into US equities could actually represent a bullish divergence for crypto.
The reasoning is quite simple: the latest crypto correction was largely driven by crypto-specific volatility, rather than a complete collapse in broader market risk appetite.
That distinction is important because it keeps the door open for a recovery once volatility stabilizes and the smart money starts flowing back in to buy the dip.
That makes this difference particularly interesting. In previous cycles, capital rotation into equities has typically been seen as bearish for crypto liquidity.
Strong this time though stock performance can actually help maintain overall market risk sentiment rather than completely draining liquidity from digital assets.
Final summary
- US equities remain highly risky, while crypto continues to face heavy correction pressure.
- This time, strong stock market momentum could still support a future crypto recovery.