Many see bitcoin as a safe haven and a valuable asset, like gold. But some currency traders treat it as a leading indicator of broader market sentiment, and they’ve been proven right again: Before finding stability near $70,000 recently, bitcoin plunged sharply, a sign of the ongoing global stock market swoon.
Bitcoin’s price peaked above $126,000 in early October and began to decline, eventually reaching a low near $60,000 early last month. The sell-off included rapid outflows from US-listed spot ETFs. CoinDesk flagged this in January, questioning whether these flows — with no clear crypto trigger — signaled an incoming macroeconomic blowout and stock market selloff.
Fast forward to today: Global market sentiment has worsened, with the Iran war and oil price rises weighing heavily on Asian and European indices. The S&P 500 and Nasdaq have also come under pressure, while the dollar index is rising. Meanwhile, bitcoin has held steady around $70,000.
Here’s where it gets even more interesting: Key stock indexes like the S&P 500 mirrored Bitcoin’s pre-crash trade back and forth in a wide range.
Bitcoin held above $100,000 for months in this volatile, expanding channel before plunging into bear territory. An identical setup has unfolded in the SPDR Financial Select Sector ETF (XLF), India’s Nifty (among the hardest hit) and S&P 500 futures.
Repeat of 2021-22
This is not the first time bitcoin has led to price action in traditional risk assets. Over the years, the cryptocurrency has often foreshadowed stock trends, most clearly in late 2021-2022.
BTC peaked near $60,000 in November 2021 and quickly fell below $50,000 in a month. The bear market deepened in 2022. The Nasdaq and S&P 500 peaked two months later in January 2022, then followed suit with their own prolonged declines as the Federal Reserve rapidly raised borrowing costs.
Todd Stankiewicz, president and chief investment officer of SYKON Capital, noted in a blog post on the Chartered Market Technical (CMT) Association’s website bitcoin’s tendency to peak before the S&P 500 in three key instances: late 2017, weeks before the COVID crash, and late 2021.
“Bitcoin either tumbled or failed to make new highs while the S&P 500 pushed forward. In each case, the stock rally eventually stalled and reversed,” Stankiewicz said.
All things considered, the takeaway is clear: stock traders should start watching bitcoin trends closely from here.
