Will the surge in tech stocks lead to funds rotating into the crypto market?

Author: Blockchain Knight; Source: @Knight_in_Block

Recently, major global stock markets have been flashing red flags, especially with US tech stocks and AI concepts surging forward, causing many investors to exclaim fear of heights.

In contrast, the crypto market appears as a bored spectator, only showing oscillating weak rebounds. This starkly contrasting trend has sparked a core market question: Will the profit-taking funds from traditional stocks eventually rotate into the crypto market? How far along is this relay race now?

Historical data shows that there are rarely absolute seesaw effects between the stock market and the crypto market. Instead, they more closely follow the transmission logic of liquidity ladders.

After Nasdaq continues to hit new highs driven by a few tech giants, early profit-taking funds tend to have a strong risk-off sentiment.

These funds inherently carry a high-risk appetite gene, and after locking in profits, they often seek valuation dips that have not yet been activated and possess high elasticity.

As a “super amplifier” of global liquidity, the crypto market naturally exhibits a lagging high Beta characteristic. Historical experience indicates that when the stock market peaks or enters high-level consolidation, it is often precisely the moment when traditional capital overflows into the crypto market.

To truly persuade traditional capital to decisively switch and enter the crypto space, several key catalysts are still needed.

First is the implementation of macro policy “boots on the ground”. Currently, we are in a policy transition period before the Federal Reserve Chair change. While there are signs of rate cuts, they are restrained by sticky inflation. Once the personnel change in May settles, or clearer signals of stopping balance sheet reduction (QT) are released, global macro liquidity expectations will be truly realized.

Second is the peak and retreat of the US dollar and US Treasury yields. In Q1, driven by a strong dollar and tariff policy expectations, the crypto market experienced a significant deleveraging wave. Only when the dollar index weakens and real yields on US Treasuries decline will global capital flow more aggressively into crypto assets.

Third is the rekindling of the “siphon effect” of compliance channels. The biggest variable in this cycle is the spot ETF. Capital rotation no longer requires complex on-chain operations but can be directly injected through compliant channels. The true explosion of rotation depends on shifting from intermittent inflows of spot ETFs to more sustained large-scale net inflows.

If we divide capital rotation into four stages—“profit-taking—waiting and accumulating—testing the waters—full-scale explosion”—the current market may be at a turning point moving from waiting and accumulating toward testing the waters.

Over the past six months, the crypto market’s chip structure has undergone reshuffling. After a sustained correction in Q1, the total derivatives position volume has been halved at high levels, with speculative bubbles and leverage mostly cleared out.
On the technical side, Bitcoin is consolidating around $80k, in a bottoming phase to digest trapped positions.

Most critically, sharp institutional funds have quietly started to run. Recently, spot BTC ETFs have seen a strong net inflow again, even reaching nearly $1 billion in a single day. This indicates that, although retail investors have not yet become frenzied, traditional capital has begun tentatively allocating some profits from tech stocks in the stock market into crypto assets.

Therefore, with the high-level fear of heights in US stocks and the gradual clarity of macro policies in May, the critical point where traditional capital shifts from tentative exploration to rotation is quietly approaching. This warrants close attention.