Bitcoin’s rising US stock market triggered a 50% BTC price crash setup
Bitcoin (BTC) erased most of its gains this week due to the U.S.-Iran war, pulling back in line with a broader downward trend in risk assets, mainly U.S. stocks.
Main Receptors:
Bitcoin's positive swing in the S&P 500 index has historically been down almost 50% since 2018.
BTC has been exposed to extensive risk-asset selling due to increased macro pressure.
Since Sunday, BTC/USD has fallen 5.65% to $68,700 for the week, while the S&P 500 (SPX) is down 1.90% for the week.
That renewed correlation is now signaling further downside risk in the Bitcoin market.
When BTC starts to follow stocks, it drops by 50% on average
The bearish warning for Bitcoin comes from a weekly correlation gauge that compares data between BTC and the S&P 500 (SPX), the US equity benchmark.
As of Saturday, the 20-week pack correlation between BTC and SPX was 0.13, down from a recent nadir of around -0.5.
Since 2018, such sharp recoveries in BTC-SPX have preceded broader Bitcoin market declines, averaging -50%.
“It's a warning sign that the stock market is going to crash and take BTC with it,” said analyst Tony Severino.
A 50% drop from Bitcoin's current price suggests a lower target of $34,350 if the historical trend repeats. Several analysts predict that Bitcoin will fall as low as $30,000–$40,000 by 2026.
In the year In 2020 and 2022, Bitcoin's declines were delayed by several months, opening after typical “bull traps” where BTC joined the SPX correlation before reversing and erasing those gains.
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Macro factors, such as higher oil prices, inflation and the possibility of a lower Federal Reserve interest rate cut, will support the outlook for Bitcoin and equities in the coming months.
Strategy adds a careful look to the pause
Bitcoin's renewed correlation with stocks coincides with a pause in corporate stocks.
Strategy (MSRL), one of the largest Bitcoin holders, will not buy BTC this week through the sale of STRC preferred stock, according to data source STRC.LIVE.
The last purchase, announced on March 16, added 22,337 BTC to $1.57 billion, bringing the total holdings to 761,068 BTC. Bitcoin rallied around 10.50% at the same time, beating US stocks.
The strategy's STRC-buying of oil helped support Bitcoin's rally during the US-Iran war. If there is no new buying this week, BTC is very vulnerable to a potential sell-off in stocks.
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