Why Crypto Is Suddenly Trading Like the Nasdaq

The first week of May saw the S&P 500 and NASDAQ reach all-time highs, pulling Bitcoin, Ether, and the rest of crypto up with them. The question arises whether markets are becoming too frothy, especially with strong corporate earnings. This week also saw the Clarity Act overcome a significant hurdle, causing a bump in crypto markets, though further challenges remain before a target signing date of July 4th. Coinbase announced a 14% staff layoff, contrasting with two multi-billion dollar VC raises deployed directly into crypto. Michael Saylor also made headlines by suggesting he might sell Bitcoin to pay dividends. Additionally, there's an update on the US strategic Bitcoin reserve, and Ethereum Layer 1 appears to be scaling. Bitcoin was up 4.5% this week, clearing $80,000 to a peak of $82,000. ETH saw a more modest 1.2% increase. A notable trend is Bitcoin's increasing correlation with the NASDAQ, reaching its highest point ever in 2026 with a correlation coefficient of 0.48. This suggests Bitcoin's price is currently heavily influenced by the stock market, particularly by the performance of AI-related stocks. Some argue that, in this environment, buying Bitcoin feels like a "worse NASDAQ" due to lower returns compared to the tech index. In contrast, privacy coins like Zcash have seen significant gains, with Zcash reaching $570 and a market cap of $9.4 billion. Multicoin Capital revealed they have been buying Zcash. VVV, Eric Vorhees's private AI project, also performed exceptionally well, hitting highs not seen since its token launch, with a market cap approaching $600 million. This highlights the current strong narrative around privacy and AI. The stock market's surge is largely driven by AI. The S&P 500 is up 17% over 39 days since the bottom of the Iran war, and the NASDAQ is up 24% in the same period. Semiconductors, led by Nvidia and Intel, are the top-performing sector, up 12.5% in two weeks. Intel alone is up 60% in two months. The second best-performing sector is industrials, benefiting from both conflict defense and AI capital expenditure buildouts. AI is a major force, pulling the entire market upward. Corporate earnings have been exceptionally strong, with 85% of S&P 500 companies beating analyst estimates, reporting average earnings 20% above projections. This marks the sixth consecutive quarter of double-digit earnings growth. This overperformance is attributed to the AI boom, with companies like Anthropic reporting an 80x year-over-year revenue and usage growth in Q1 2026. Many believe the utility and productivity gains from AI are insatiable, driving this unprecedented market growth. Despite the market euphoria, some indicators suggest frothiness. Jason Goepfert noted that the S&P 500 recently closed at a record high while over 4% of its stocks hit 52-week lows, a rare occurrence historically associated with market peaks like 1929. Another concern is the escalating US federal debt, which as a percentage of GDP, has surpassed 100% for the first time since 1946, a wartime level of debt. Berkshire Hathaway, led by Warren Buffett, has also been aggressively selling into the market, accumulating a record cash balance of almost $400 billion. Buffett describes the market as a "casino" that has become "very attractive," indicating his view that stocks are currently expensive. Regarding the Iran situation, Project Freedom, an initiative to open the Strait of Hormuz by force, was announced by Trump but paused less than 48 hours later after Iran sent missiles and drones towards the US Navy and struck a UAE oil facility. Talks in Pakistan to secure a deal with Iran have resumed. While seemingly little has changed, oil prices are down 15-18% this week, and 10-year yields are down 2.7%, indicating less global economic pain. This shifts the "pain tolerance game" in favor of the rest of the world compared to Iran. Poly Market probabilities for a permanent peace deal between the US and Iran by June 30th are at 53%, up 14% week-over-week. The Clarity Act made progress this week. Senator Tom Tillis announced a compromise that prohibits stablecoin rewards from resembling interest on bank deposits, addressing banks' concerns about deposit flight. The target signing date is July 4th. The compromise centers on distinguishing between rewards for "holding" stablecoins (not allowed) and rewards for "activity-based or transaction-based" usage, such as payments, transfers, market-making, staking, governance, or loyalty programs (allowed). The SEC, CFTC, and Treasury will jointly provide further clarity on this within one year. This means that while simple "set and forget" stablecoin yield might be restricted, more active participation could still offer rewards. The banking industry is still lobbying for more restrictions. Other outstanding issues include developer and DeFi protections, which are still under negotiation, and an ethics provision regarding the Trump family's crypto activities, which could potentially derail the entire act. Poly Market shows a 66% probability of the Clarity Act passing by July 4th, up from 46% recently. Coinbase announced a 14% staff reduction, which is a pattern observed at the bottom of previous crypto cycles (2018, 2022). CEO Brian Armstrong cited a desire for a flatter organizational structure with no pure managers, though AI was mentioned as an efficiency driver rather than the sole reason. This layoff, totaling 1,200 crypto layoffs in the past five months, is seen by some as a "bottom signal." Conversely, venture capital funding remains robust, with A16Z raising $2.2 billion and Han Ventures raising $1 billion for crypto-focused funds, totaling $3.2 billion. Other funds like Dragonfly, ParaFi, Blockchain Capital, and Paradigm (also investing in AI and robotics) bring the total to nearly $6 billion in crypto and crypto-adjacent funds. These funds are primarily targeting new financial infrastructure, stablecoins, new assets, and the "agentic economy," with less emphasis on DeFi or Layer 1s. Michael Saylor of MicroStrategy publicly stated that he might sell some Bitcoin to pay dividends, a statement that goes against his long-standing "never sell Bitcoin" mantra. This strategy involves buying Bitcoin with credit, letting it appreciate, and then selling a small portion to cover dividend payments. This approach is seen as a way to attract more investors to MicroStrategy's "Stretch" product (preferred shares), as it provides a clearer mechanism for yield payment, thereby expanding the potential market for his capital raises to acquire more Bitcoin. Ethereum Layer 1 scaling is back on the agenda. Following a meeting of developers in the Arctic Circle (Svalbard), the upcoming Glamsterdam hard fork will include an increase of max block space from 60 million to 200 million. This puts Ethereum back on track with a projected 3x per year scaling trend line, potentially leading to 7x more transactions per second and block space availability on the L1 in 12 months, reaching 80-100 transactions per second. This significant increase in block space suggests that blockchain fees, particularly on Ethereum, may become increasingly rare due to reduced block space contention. The implication is that Ethereum's value proposition increasingly leans towards being a store of value asset rather than relying on fee generation. Finally, a US strategic Bitcoin reserve appears to be materializing. Following previous hints, Patrick Wit, the White House official responsible for crypto policy, announced that an official announcement is coming in "the next few weeks." This is expected to involve the implementation of Trump's executive order from last year, which called for centralized cold storage of all US government-held Bitcoin, an audit framework, and a formal commitment to not selling these assets. The US government currently holds an estimated 300,000 to 328,000 Bitcoin, though a portion is tied up in court cases. The "Fort Knox" pile for the strategic reserve is likely closer to 150,000-200,000 Bitcoin. This move is seen as a significant legitimization of Bitcoin, designating it as a reserve asset alongside gold and fiat currencies. While not an announcement of new Bitcoin purchases, the creation of a secure, centralized government vault for digital bearer instruments is considered a highly bullish development for Bitcoin's long-term adoption and status.