Wintermute: The correlation between crypto and US retail stocks has turned negative; US stock activity has become a leading indicator for the crypto market

Retail investors have always been one of the most important participant groups in the crypto market. From early retail FOMO to later meme coin frenzy, the inflow and outflow of retail funds often directly determine the market cycle’s height and slope. However, a cross-data set from Wintermute and JP Morgan’s strategy team reveals a key change: starting in Q4 2024, the correlation between retail fund flows in the US stock market and the crypto market has shifted from positive to negative. This means retail investors are no longer increasing their positions in both risk assets simultaneously but are beginning to switch between them in a “choose one” manner. Based on this data, this article systematically analyzes the structural shift in retail fund behavior, the driving factors behind it, and its profound impact on the crypto market.

Correlation Reversal: When Crypto and US Stocks Are No Longer “Allies”

Market maker Wintermute, combining its retail fund flow data with JP Morgan’s retail stock inflow data, found that the correlation between retail activity in US stocks and crypto markets experienced a historic reversal at the end of 2024. In previous years, they mostly moved in tandem, reflecting retail investors increasing both assets’ holdings when risk appetite rose. But since October 2024, this relationship has been broken: as retail funds rapidly flowed into US stocks, participation in crypto markets noticeably cooled, creating a “see-saw” effect. Wintermute points out that this change indicates that activity in US stocks is now a leading indicator for crypto investors observing capital reflows.

From Co-movement to Divergence: Timeline Review of Retail Fund Flows

From 2022 through Q3 2024, crypto and US stock retail activity generally maintained a positive correlation. During this period, both were viewed by retail investors as “high-risk asset portfolios,” receiving synchronized inflows during macro liquidity easing or risk appetite recovery phases. The turning point occurred in Q4 2024. As US stocks continued to strengthen under multiple catalysts, retail funds began showing a clear preference shift. Since 2025, this trend has further intensified:

• April 2025: US stocks rebounded sharply after tariff policy shocks, with retail funds showing a persistent “buy-the-dip” pattern;
• During the same period, crypto markets saw occasional hotspots in meme coins and AI-themed tokens, but overall retail participation failed to sustain;
• After October 2025, retail funds almost completely shifted to US stocks, and crypto entered a retail wait-and-see phase.

Quantitative Evidence of Retail Migration: Correlation Data and Volatility Structure

Wintermute uses altcoin market cap as a medium- to long-term proxy for retail crypto activity, which correlates highly with its internal retail flow data and has longer historical traceability. Data shows that from 2022 to Q3 2024, altcoin market cap and US stock retail activity mostly had positive rolling correlations. But from late 2024 onward, this correlation has been steadily declining and has now clearly turned negative. Quantitatively, this confirms that retail investors are reallocating between these two asset classes rather than increasing both simultaneously.

Looking at volatility structures, although crypto assets still exhibit higher volatility than US stocks, the gap is narrowing. In the first half of 2025, the volatility ratio of Bitcoin to the Nasdaq index briefly fell below 2, hitting a historic low. For retail funds chasing volatility, the relative attractiveness of US stocks has thus increased. In terms of absolute fund flows, retail inflows into US markets far exceed those into crypto, making the causal direction clearer—rising activity in US stocks is pulling retail capital away from crypto rather than the other way around.

Mainstream Market Narratives: Volatility, Maturity, and Technological Parity

There are various interpretations of this structural change, with mainstream views summarized as follows:

• Volatility Competition Perspective: Wintermute’s analysis suggests that the narrowing volatility advantage of crypto is a core reason for its loss of retail appeal. For speculative funds chasing volatility, US stocks are becoming more attractive.
• Market Maturity Perspective: Some analysts believe that increased institutionalization of crypto, along with the emergence of compliant products like ETFs, reduces extreme volatility and thus diminishes the natural appeal to retail speculative capital.
• Technological Empowerment Perspective: Others emphasize that AI tools lower the analysis threshold for retail investors in US stocks, giving them a sense of “cognitive parity” in traditional markets; in contrast, the lack of a unified valuation framework in crypto makes it harder for retail investors to grasp.

Examining the Narratives: Facts, Opinions, and Unverified Speculations

All these viewpoints have some data or logical support, but it’s important to distinguish facts from speculation.

• Facts: The correlation turning negative, volatility ratio narrowing, and continuous US retail inflows are verifiable phenomena.
• Opinions: Attributing the “loss of attractiveness” of crypto to factors like market maturity is still speculative. For example, while increased maturity may reduce volatility, whether volatility is the sole driver of retail interest remains to be supported by behavioral finance evidence. Similarly, the actual impact of AI empowerment on retail perception may differ from subjective impressions, and its true influence is hard to quantify.

New Challenges for Crypto Investors: Incorporating US Stocks into Monitoring Frameworks

The structural shift in retail fund behavior has multiple implications for crypto market investors:

• Indicator System Reconfiguration: Traditional on-chain activity metrics like active addresses and exchange flows need to be supplemented with external asset class fund flow data. US retail data is becoming a new leading indicator for crypto liquidity prediction.
• Redefining Capital Reflow Conditions: To attract retail funds again, crypto markets may need to meet more stringent conditions—either exhibiting volatility or narrative hotspots that surpass US stocks, or US stocks entering a phase of cooling.
• Changes in Investor Structure: If retail funds tend to rotate between assets rather than hold both simultaneously, retail participation in crypto will become more cyclical, and market volatility may increasingly be driven by institutions and algorithmic trading.

According to Gate’s market data, as of February 27, 2026, Bitcoin (BTC) is priced at $67,292.70 USD, down 1.41% in 24 hours; Ethereum (ETH) is at $2,026.68 USD, down 1.28%. The overall market is in a consolidation phase with decreasing volume, contrasting with recent active US stock performance.

Future Scenarios: Three Potential Paths of Capital Flow Evolution

Based on current data and driving factors, three future retail fund flow scenarios are possible:

• Scenario 1: US stocks continue to siphon funds, leading to a “low tide” in crypto retail participation. If US stocks maintain their current profitability, retail capital may keep flowing out of crypto, making the market more dependent on institutional funds and short-term narratives. This is a neutral to pessimistic outlook.
• Scenario 2: US stocks cool down, prompting retail funds to flow back into crypto. Once US stocks enter a correction, some retail speculative capital may seek high-volatility opportunities in crypto, temporarily boosting altcoin market cap. This scenario depends on Fed policy and US earnings fundamentals.
• Scenario 3: Crypto markets generate new narratives, reigniting retail independent trends. If technological breakthroughs, killer apps, or new asset issuance mechanisms emerge in crypto, retail interest could be reactivated independently, breaking free from US stock capital flow dependence. This scenario carries the highest uncertainty but represents the most promising endogenous growth path.

Conclusion

The shift from “simultaneous increase” to “choose one” by retail capital marks a fundamental change in the role of crypto in retail investors’ asset portfolios. It is no longer the sole speculative outlet but now stands alongside US stocks as a risk asset option. This change requires crypto investors to broaden their perspective, incorporating US retail activity into their monitoring frameworks to better identify capital reflow windows. The key question for future markets may no longer be “When will crypto see retail re-entry?” but rather “Under what conditions will retail choose crypto over US stocks?” The answer will depend on a complex interplay of volatility, narratives, and technological empowerment.