Why the crypto market now looks healthier than the S&P 500

The S&P 500 is at record highs, but that number hides a weakness. Much of the index is driven by artificial intelligence (AI), while most stocks are in a downtrend.

Although the crypto market still has a long way to go until the historical peak, the vast majority has now started an upward march again after a long time.

The S&P 500 tracks the 500 largest US companies. The larger a company, the heavier it counts.

Companies that earn directly from AI, such as chipmakers and cloud giants, make up 40 to 62 percent of the index. That depends on how broadly you take AI.

Those companies do make real money. Tech giants put hundreds of billions of dollars into data centers, and that money ends up as revenue at chipmakers like Nvidia and AMD. Energy companies are also hitchhiking, because data centres are swallowing electricity.

The ten largest companies alone account for around 40 percent of the index, according to J.P. Morgan. At the height of the internet bubble around 2000, that was over 26 percent.

That makes the S&P 500 vulnerable. If a few of those giants trip, the entire index goes down with them.

The rest of the index is less important. Of the 500 stocks, 257 have fallen below their 200-day average. This means that the price is pointing downwards in the long term.

In the middle of the summer, about 70 percent were still above that line, according to investment platform GuruFocus. Also, more stocks have recently fallen to their lowest level of the year than have reached a new peak.

The knife cuts on both sides. Software companies like Intuit have lost more than half of their value this year, fearing that AI will make their products obsolete.

And there are also hard blows outside the tech sector. Real estate data provider CoStar Group, medical technology company Boston Scientific and sportswear brand Lululemon all lost about half of their value this year.

So the conclusion is simple: below that record, the majority of US equities are not in the best position.

The past year has been a dark winter in cryptoland, but the cold has now receded considerably. Of the 100 largest crypto coins, 88 are now above their 200-day average.

A few months ago, that number could still be counted on one hand. The S&P 500 is currently less than 49 percent above that line.

So on the inside, the crypto market looks healthier than the US stock market. Bitcoin is still 32 percent below its record level of October last year. And for most altcoins, such as XRP and Solana (SOL), the peaks are much further out of sight.

“If the ETF demand holds up and the supply of stablecoins starts to grow again, the rally will have a solid foundation,” writes Trace Finance CEO Bernardo Brites.

The fact that the wind has now turned in the crypto world is evidenced by the fact that the Bitcoin price has regained many important price levels. For example, the 365-day average, after the price has traded no less than 310 days below.

Bitcoin seems to be confirming the end of the downturn this week if the price manages to stay above 82,850 dollars. That would mark the first higher high since October and many altcoins are now also in an upward trend.