Why bitcoin has rallied to a $112,000 record high while stocks are wobbling

By Frances YueThe new bitcoin rally to fresh highs might not see stocks tag along for the rideFor years, bitcoin and equities, especially tech stocks, have moved in tandem. However, bitcoin's rally to a fresh record high this week doesn't necessarily mean stocks will follow along.Both stocks and cryptocurrencies have been perceived as risky assets for years, but in 2025, there have been more episodes of divergence in their prices. Bitcoin (BTCUSD) showed more resilience than stocks during the market turbulence earlier this year sparked by uncertainty around President Donald Trump's tariff policies, though analysts said it was too early to call for a decoupling.Read: 'Too early' to call bitcoin a safe haven as it outperforms stocks and dollar amid tariff turmoilFurthermore, bitcoin's recent strength is likely not a reflection of a classic risk-on tone, according to Jay Hatfield, chief executive and chief investment officer at Infrastructure Capital Advisors. The largest cryptocurrency traded as high as $111,986 on Thursday, a record level, before pulling back slightly to around $108,700 on Friday, according to Dow Jones Market Data.Instead, bitcoin's rally was driven more by optimism around an increasingly friendly regulatory environment for crypto under the Trump administration, Hatfield said in emailed comments. Such changes have been viewed as bullish for crypto but have nothing to do with stocks, he said.U.S. stocks SPX ended mostly flat on Thursday after the three major indexes on Wednesday recorded their worst day in a month. A spike in Treasury yields BX:TMUBMUSD10Y and concerns around the potential for the U.S. deficit to grow under Trump's huge tax bill, which was passed Thursday morning by House Republicans, have weighed on stocks.While stocks can rise and fall on a dime - as they did on Thursday - crypto bulls have long argued that bitcoin may eventually serve as a store of value and a hedge against expansionary fiscal and monetary policies.Helping bolster that argument, more institutions have been allocating more of their portfolios to crypto. And they may be doing so by trimming their allocation to stocks, according to Michael Green, chief strategist at Simplify Asset Management.In February, BlackRock, the world's largest asset manager, added a 1% to 2% allocation to its iShares Bitcoin Trust ETF IBIT in its target allocation portfolios that allow for alternatives. The team also trimmed its overweight to equities to 3% from 4% at that time, and it recently reduced its overweight to stocks further to 1%, according to reports on Wednesday.On the policy front, several states have been taking steps to potentially establish bitcoin reserves. On Wednesday, the Texas House of Representatives passed a bill to establish a strategic bitcoin reserve. The bill is now awaiting a procedural vote before making its way to the governor's desk.Earlier this month, New Hampshire Gov. Kelly Ayotte signed a bill into law to allow a portion of the state's public funds to be invested in digital assets.Such efforts mirror Trump's executive order in March to create a federal bitcoin reserve, which fueled excitement among crypto enthusiasts.Adding to the potential tailwinds for crypto is new legislation aiming to regulate stablecoins, a type of cryptocurrency whose value is pegged to another asset, which was on its way to a vote in the Senate.Should the bill become law, crypto bulls see potential for it to drive wider adoption of dollar-linked stablecoins and push forward the integration of crypto assets with the existing financial system.-Frances YueThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.