Switching from crypto to stocks? Cryptocurrency liquidity shifts to the US stock market, with AI becoming the best cross-market aid

According to the latest data research from market maker Wintermute, a structural shift has been identified: retail crypto funds are flooding into the U.S. stock market, while the crypto market is facing a liquidity withdrawal test. Where exactly is this capital shift coming from? How should investors adjust their strategies?

Decoupling of U.S. Stocks and Cryptocurrencies: Retail Funds Show Pendulum Effect

Historical experience indicates that capital flows between stocks and cryptocurrencies are usually highly correlated, often seen as the preferred investment during times of excess market liquidity and increased risk appetite. However, combined data from Wintermute and JPMorgan shows that this positive correlation has significantly broken down by the end of 2024.

Retail investors are pouring record amounts of funds into stocks while becoming more cautious about cryptocurrencies. Using “total market cap of altcoins” as a long-term indicator of retail activity reveals that the relationship has shifted to a “negative correlation.” This means funds are no longer flowing into both markets simultaneously but are instead exhibiting a crowding-out effect. Currently, the surge in retail trading in stocks is effectively absorbing liquidity from the crypto market.

Crypto Market Matures: The Myth of Quick Riches Fades

In the past, meme coins and various altcoins experienced dramatic price swings, which attracted retail investors seeking excess returns. However, with the total market cap of cryptocurrencies reaching $2.3 trillion and Bitcoin spot ETFs gaining approval through institutional participation, the market structure has gradually matured.

Data shows that the volatility gap between Bitcoin and the Nasdaq 100 index is continuously narrowing. In the first half of 2025, the volatility ratio between the two even dropped below 2. When the market can no longer generate the same boom-and-bust wealth effects as before, retail investors seeking capital efficiency and volatility naturally turn their attention to the recently strong and active stock markets.

AI Lowers Barriers for Retail Investors Across Markets

Beyond structural changes, today’s brokerage and wealth management platforms have seamlessly integrated stock and crypto trading, breaking down the previous barriers to capital flow between the two. Funds are no longer confined within the crypto ecosystem’s “internal cycle” but can move freely between U.S. stocks and cryptocurrencies.

More importantly, the proliferation of generative AI and large language models (LLMs) has significantly enhanced retail investors’ ability to interpret financial reports and analyze the stock market, giving them unprecedented confidence in stock investing. In contrast, cryptocurrencies still lack a widely accepted valuation model and fundamental framework, making it harder for retail investors to develop the same analytical advantages in the crypto space.

Diversified Asset Allocation Adapts to New Patterns

Overall, retail investors are not leaving the market but are shifting their risk preferences toward stock markets that offer advantages and volatility comparable to the current crypto space. Cryptocurrencies have transitioned from being a “core speculative asset” to a regular component of diversified portfolios.

This article: “From Crypto to Stocks? Liquidity Flows from Crypto to U.S. Stocks, AI Becomes the Best Cross-Market Assistant” first appeared on Chain News ABMedia.