Why Is Bitcoin's Price Falling With Software Stocks?
Today’s Letter is Brought To You by Abra!
Borrow up to 50% of the value of your crypto holdings with Abra in a highly flexible open term loan. Your collateral is held in a separately managed account where you retain legal title to the assets. Rates are highly competitive, ranging from 4-7%APY.
No interest payments are required during the life of the loan. There are no minimums or maximum loan sizes.
To learn more, click here. To set up an account, click here for individuals and here for entities.
To investors,
The main story for investors over the last few weeks has been the rapid sell-off in software stocks. To better understand why this has happened, I asked Silvia (the AI-powered CFO we built) to explain. Here is what she said:
The selloff — dubbed the “SaaSpocalypse” — has wiped out over $1 trillion in market capitalization from software stocks since late January 2026. The primary driver is a sudden and intense fear that AI, particularly the emergence of autonomous AI agents (like Anthropic’s Claude Cowork), is on the verge of cannibalizing the traditional SaaS business model. Investors are worried that if AI tools can replace entire software workflows — from coding to customer service to IT management — then the per-seat, subscription-based pricing model that has underpinned SaaS valuations for a decade is fundamentally threatened. The iShares Tech-Software ETF (IGV) has plunged roughly 20% year-to-date, with major names hit hard: Microsoft is down ~28% from its highs, Oracle ~55%, Salesforce ~30%, and Adobe ~27%, according to USA Today and Reuters.
Adding fuel to the fire is a massive sector rotation. Capital is flooding out of legacy SaaS names and into AI infrastructure plays, value stocks, and industrials. Forward earnings multiples for software have compressed from roughly 39x to 21x — hitting multi-year lows — even though fundamentals have largely held up. According to AInvest, 100% of reporting S&P 500 software firms beat profit targets last quarter, with 80% exceeding revenue estimates. Companies like ServiceNow and AppLovin posted record earnings but still saw their shares punished, as Wall Street has shifted its focus from current profitability to terminal value — essentially asking whether these incumbents can survive a world of autonomous AI agents. J.P. Morgan has called the selloff driven by “broken logic”, arguing the market is pricing in worst-case disruption scenarios that haven’t materialized.
These are fairly big promises that stock market bears are relying on for their investment thesis. It doesn’t make sense that all software companies are suddenly significantly less valuable than a few weeks ago.
Silvia went on to explain the key debate between this being an overreaction from investors or a structural turning point in the market:
“Bears argue that AI agents will commoditize software, compress margins, and erode installed bases — some analysts at Bain and Forrester note that CIOs are consolidating software budgets and redirecting spend toward AI tools, not expanding SaaS footprints.
Bulls counter that deeply embedded “system-of-record” platforms (like Salesforce, ServiceNow, and Intuit) have sticky customer bases and recurring revenue that won’t evaporate overnight, and that current valuations may present a compelling entry point.
The truth likely falls somewhere in between — AI will reshape the sector, but the indiscriminate nature of this selloff is pricing many quality names as if their businesses are already in decline, when the data doesn’t yet support that conclusion.”
One of the questions I continue thinking about is the relationship between software stocks and bitcoin. If software stocks are selling off because of the AI fears, then why would bitcoin sell off at the same time? Are investors worried about bitcoin in relationship to AI?
Silvia explained the relationship well:
The correlation between Bitcoin and software stocks has surged to striking levels in early 2026. As of February, Bitcoin’s 30-day rolling correlation with the iShares Expanded Tech-Software ETF (IGV) hit 0.73. This is a remarkably high reading. Bitcoin’s correlation with the Nasdaq 100 has similarly swung from -0.68 to +0.72 in just a few weeks. Meanwhile, its correlation with gold sits at a paltry 0.12. In practice, Bitcoin is trading like a high-beta software stock, not a safe haven.
The mechanism driving this linkage is institutional flow dynamics, not fundamental overlap. Since spot Bitcoin ETFs launched in early 2024, Bitcoin has been increasingly held within the same institutional portfolios as growth and tech equities. When a risk-off event hits — like the AI-driven software selloff triggered by Anthropic’s Claude Cowork launch — portfolio managers de-risk across the board, selling both software stocks and Bitcoin simultaneously. Bitcoin ETFs saw $272M in daily outflows at the peak of the selloff, and cumulative crypto product outflows reached $1.7B. This isn’t a crypto-specific story — it’s a broader risk-off regime where capital rotates out of growth assets and into gold, treasuries, and cash. Bitcoin, as a risk-on asset held by the same institutions, gets caught in that undertow.
The key nuance — and what makes this particularly painful — is that Bitcoin exhibits a negative skew in its correlation. Bitcoin follows software stocks down more aggressively than it follows them up. When IGV rallies, Bitcoin’s reaction is muted; when IGV sells off, Bitcoin tends to amplify the move. This asymmetry is the worst of both worlds — Bitcoin captures the downside of tech correlation without fully participating in the upside. Stifel has even projected Bitcoin could fall to $38,000, citing its 0.78 correlation with the Nasdaq 100 as evidence it now behaves like a leveraged tech bet rather than a dollar hedge.
It is clear that the selloffs are highly correlated right now. The most likely scenario where the correlation breaks down is if institutional investors stop treating bitcoin as a growth/risk-on asset.
As long as Bitcoin sits in the same sleeve of institutional portfolios as software stocks and is governed by the same macro triggers (Fed policy, liquidity, risk appetite), it will keep trading like a leveraged tech bet. For this to change, a critical mass of Bitcoin’s marginal buyers would need to shift from momentum-chasing hedge funds and ETF-driven retail to structural, price-insensitive holders…mainly entities that buy and hold regardless of quarterly macro shifts.
The most plausible catalyst is sovereign adoption at scale.
The U.S. has already established a Strategic Bitcoin Reserve using seized assets, and countries like Brazil, El Salvador, and Bhutan are exploring or actively accumulating Bitcoin as a sovereign reserve. Central bank gold reserves have now surpassed foreign-held U.S. Treasuries for the first time since 1996, which could be a structural “sovereign rotation” that Bitcoin could eventually benefit from if it proves to be a credible neutral reserve asset. If major central banks (particularly China or Middle Eastern sovereign wealth funds) began actively acquiring Bitcoin that would create a massive base of price-insensitive demand that absorbs sell pressure during risk-off events, fundamentally dampening its equity correlation.
This is essentially what has been happening with gold, so bitcoin aspires to follow in the precious metals footsteps.
Any decoupling of bitcoin from software stocks will be a multi-year process.
It requires a gradual shift in Bitcoin’s holder base from speculative/institutional to sovereign/structural, a compression in volatility, and at least one crisis where Bitcoin doesn’t sell off with everything else. The sovereign reserve trend is the most promising catalyst on the horizon, but as long as ETF-driven institutional flows dominate Bitcoin’s marginal pricing, it will continue to behave as a high-beta extension of the growth/tech complex during periods of stress.
So one way to think about bitcoin’s current correlation is the asset is a victim of its own success. We wanted mainstream adoption, which what we have accomplished, but that mainstream adoption (especially by Wall Street) brings side-effects. The new correlation with software stocks is the most obvious one.
Bitcoin will be just fine. I anticipate it will continue to do very well in the future. Your challenge as an investor is to avoid getting bored. Best of luck to each of you.
You can sign up to use Silvia for free here: www.cfosilvia.com
Have a great day. I will talk to everyone tomorrow.
- Anthony J. Pompliano
Founder & CEO, Professional Capital Management
Why Bitcoin Volatility Is the Bull Case
Matt Cole is the CEO of Strive Asset Management, and Jeff Park is a Partner & Chief Investment Officer at ProCap Financial. This conversation was recorded live at Bitcoin Investor Week in New York.
In this conversation, we break down why bitcoin’s volatility doesn’t change the long-term story, how institutions think about drawdowns, and what today’s Fed policy could mean for bitcoin and other risk assets. We also touch on digital credit, bitcoin-backed yield, and why volatility may actually be one of bitcoin’s biggest advantages for long-term investors.
Podcast Sponsors
Figure – True DeFi Democratized Prime to earn ~9% APY! They also have the lowest industry interest rates at 8.91% with 12 month terms! Take out a Bitcoin Backed Loan today and buy more Bitcoin. Check out Figure! Figure Lending LLC dba Figure. Equal Opportunity Lender. NMLS 1717824. Terms and conditions apply.
Arch Public - Arch Public’s cutting-edge algorithm tools ignite profits, harnessing razor-sharp data analytics to nail perfect entries, exits, and risk management. Turn volatility into opportunity and do it hands free with Arch Public. (Oh, and yes, try us out for FREE too!)
Award-winning Fountain Life - Energy supercharged. Memory sharper. Life extended. Ready for the best investment you’ll ever make? Schedule a life-changing call at www.FountainLife.com
Bitget - Bitget is the world’s largest Universal Exchange (UEX), serving over 125 million users with access to over 2M+ crypto tokens, and TradFi markets such as 100+ tokenized stocks, ETFs, commodities, FX and precious metal like Gold.
Abra - This podcast is sponsored by Abra. Abra is the secure way to access crypto and crypto based yield and loan products through a separately managed account. To create an account, click here for individuals and here for entities.
BitcoinIRA - Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Pay less taxes. Earn up to $1,000 in rewards.
Simple Mining offers a premium white-glove Bitcoin mining service. Want to grow your Bitcoin stack? Visit https://www.simplemining.io/
Summ – (formerly Crypto Tax Calculator) generates accurate IRS-ready tax reports that help maximize deductions and pay the least tax possible. With support for 3,500+ exchanges, wallets, and protocols, Summ makes crypto taxes simple. Visit Summ.com and get 20% off with code POMP20.
Bitlayer - Bitlayer is powering Bitcoin beyond just a store of value, making Bitcoin DeFi a reality while staying true to its core principles of security and decentralization. Learn more about Bitlayer at https://x.com/BitlayerLabs
🚨READER NOTE: If you want to sponsor The Pomp Letter, you can fill out this form and someone from our team will get in touch with you.
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.
Superb analysis of the correlation mechanics. The sovereign adoption catalyst point is compelling - though even sovereign buyers tend to allocate gradually in tranches, meaning de-correlaition dunno happen in one discrete event but through a slow accumulaiton that reshapes who absorbs sell pressure. What really matters is whether price-insensitive sovereigns become the marginal buyer at the next dip. I've watched similar dynamics play out with gold when central bank buying quietly changed the floor price in 2010-2012.
Seems to me that THIS is the type of article / analysis most of us who read Pomp are here for (as opposed to the thinly veiled partisan rhetoric).
More of this please.