Bitcoin (CRYPTO: BTC) and the broader $2.3 trillion digital asset market are bleeding retail capital as traders aggressively pivot into equities, driven by plunging crypto volatility and a new AI-powered edge in the stock market.
According to new flow data from JPMorgan and Wintermute, the historical relationship between retail stock and crypto buying officially broke down in late 2024.
Instead of buying both as risk-on assets, retail traders are now treating them as direct substitutes.
The correlation has flipped negative. When retail aggressively buys stock market dips, they sit on the sidelines in crypto.
Why The Money Is Moving Out Of Crypto
Retail defined every major crypto cycle through reflexive dip-buying and rapid capital rotation. That behavior is shifting to the stock market for three structural reasons.
First, tetail trades crypto for the massive price swings.
But as the market matures with institutional ETFs, volatility is structurally compressing.
The BTC-to-Nasdaq volatility ratio fell below 2x in the first half of 2025.
Stocks now offer competitive volatility without the extreme drawdown risk.
Second, traders are actively using Large Language Models (LLMs) to analyze stock fundamentals and earnings reports, creating a perceived edge in traditional finance.
Crypto lacks consensus valuation frameworks, making AI tools far less effective for picking tokens.
Finally, modern brokerage apps blend crypto and stock trading seamlessly.
In past cycles, onboarding friction kept capital “trapped” in the crypto ecosystem, forcing profits to rotate from Bitcoin into altcoins.
Today, traders simply sell their crypto and immediately rotate into the SPDR S&P 500 ETF Trust (NYSE:SPY) in the same app.
What This Means For Investors
Crypto is no longer a standalone ecosystem. It is competing directly with equities for retail liquidity.
Traders looking for the next structural crypto bid must now monitor equity market volumes.
Wintermute data shows that altcoins, memecoins, and AI agents only caught sustained retail interest this year when equity market activity temporarily stagnated.
To catch the next major crypto rotation, watch the stock market.
If retail keeps piling into equities, the crypto market will remain starved of the capital that fueled its previous all-time highs.
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