Bitcoin (BTC) erased most of its gains from the U.S.-Iran war this week, retreating in line with a broader downtrend in risky assets, mainly U.S. stocks.
Key conclusions: :
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Bitcoin’s positive return in S&P 500 correlation has historically preceded average declines of around 50% since 2018.
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BTC is exposed to a broader sell-off in risky assets due to increasing macro pressures.
As of Sunday, BTC/USD was down 5.65% week-to-date to around $68,700, while the S&P 500 (SPX) ended the week down 1.90%.
This renewed correlation now signals greater risk of further declines in the Bitcoin market.
BTC drops by an average of 50% when it starts to track stocks
The bearish warning for Bitcoin comes from a weekly correlation indicator comparing BTC to the S&P 500 (SPX), the US equity benchmark index.
On Saturday, the 20-week trailing correlation between BTC and SPX was 0.13, down from a recent low of around -0.5.
Since 2018, such a acute recovery in the BTC-SPX correlation has preceded broader declines in the Bitcoin market, averaging around -50%.
“This is a warning signal that the exchange will collapse and BTC with it” he said analyst Tony Severino.
A 50% decline from Bitcoin’s current price would mean a target decline of around $34,350 if the historical pattern repeats. Many analysts predict that in 2026 the price of Bitcoin will drop to as much as $30,000-40,000.
In 2020 and 2022, Bitcoin’s declines were lagged by several months and developed after classic “bull traps” in which BTC gained as the SPX correlation rose, before reversing and wiping out those gains.
Related: Bitcoin Options Signal Fear Even as BTC ETF Outflows Remain Relatively Low
Macro conditions such as elevated oil prices, inflation, and the Federal Reserve being less likely to cut interest rates support a bearish outlook for Bitcoin and stocks in the coming months.
Pausing the strategy encourages a cautious approach
Bitcoin’s renewed correlation with stocks also coincides with a pause in corporate accumulation.
According to data resource Strategy (MSTR), one of the largest holders of Bitcoin did not buy BTC by selling its STRC preferred stock this week LIVE SITE.
Its latest acquisition, announced on March 16, added 22,337 BTC worth $1.57 billion, bringing its total holdings to 761,068 BTC. Bitcoin rose about 10.50% over the same period, outperforming U.S. stocks.
Strategy’s STRC-fueled purchases helped support Bitcoin’s growth during the US-Iran war. Without up-to-date purchases this week, BTC is more exposed to a potential stock sell-off.
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