An analysis said the main cause of bitcoin’s recent weakness lies less within the cryptocurrency market than in extreme concentration of funds in the U.S. stock market.

Binance Research diagnosed that bitcoin is being pushed down the priority list as money concentrates in a small number of stocks and specific themes in the U.S. stock market, CoinPost reported on June 3 local time.

A key indicator cited was the CBOE Dispersion Index (DSPX). The index is based on prices of S&P 500 index options and single-stock options and shows how widely share-price moves are spread across constituent stocks. Binance Research pointed to DSPX at 42, the third-highest level on record. The higher the figure, the larger the gap in returns between stocks and the more strongly market funds are concentrating in a few winners.

Binance Research described the environment as a “capital black hole” in which a small number of popular stocks absorb all inflows. It said the stronger this trend becomes, the more bitcoin investment is pushed into a supporting role. When very high returns appear in parts of the stock market, money concentrates in those stocks and themes, and bitcoin market liquidity is sucked in, leading to weaker prices, it said.

It also cited examples. In 2015, funds crowded into FAANG and biotech stocks and bitcoin fell 20 percent. In 2016, money moved into defensive stocks such as consumer staples and utilities and bitcoin slipped 18 percent. In 2018, it dropped 68 percent during a late-cycle FAANG-led market, and in 2022 it fell 50 percent during a phase of concentration in energy stocks.

It also stressed that in the current market environment bitcoin is being squeezed out among multiple investment themes. It said growth money is moving into AI and advanced technology, money positioning for geopolitical risks into defence and energy, and inflation-hedge flows into commodity markets.

It also mentioned the possibility of a recovery. Binance Research said bitcoin ultimately rebounded after such stock-led markets ended in the past. In particular, after DSPX passed its peak, if the impact was driven by funds concentrating in other asset classes rather than problems within the crypto market itself, it said the time taken for bitcoin to form a bottom was 0 to 20 weeks, with a median of about 2 weeks.

As a result, it said a key point to watch will be whether concentration of funds in the U.S. stock market eases. Binance Research said bitcoin weakness should be viewed not only as crypto-specific bad news, but also alongside U.S. theme-driven equity markets and shifts in liquidity.