Many people see Bitcoin. As a safe haven and valuable asset, like gold. But some currency traders see it as an important indicator for broader market mood, and they’ve been right again: Bitcoin sank sharply before recently consolidating near $70,000, raising the risk of an ongoing global stock market rout.
Bitcoin’s price peaked above $126,000 in early October and began to fall, eventually reaching close to $60,000 early last month. The sell-off includes a rapid exit from US-listed spot ETFs. CoinDesk flagged this at the end of November, questioning whether the flow — there is no clear crypto trigger — was a sign of an impending macroeconomic setback and stock market sell-off.
Fast forward to today: Global market sentiment has soured with the Iran war and rising oil prices weighing heavily on Asian and European indices. The S&P 500 and Nasdaq also came under pressure, while the dollar index rose. Meanwhile, Bitcoin has been holding steady around $70,000.
Here’s where it gets even more interesting: Key equity indexes and stock ETFs are reflecting bitcoin’s pre-crash trading over a wide range.
Bitcoin held above $100,000 for months in this volatile, expanding channel before plunging into bear territory. The SPDR Financial Select Sector ETF (XLF), India’s Nifty (among the worst affected), and S&P 500 futures have seen similar setups.
Repeat 2021-22.
This is not the first time that Bitcoin has led price action in traditional risk assets. Over the years, the cryptocurrency has often predicted equity 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 topped out two months later in January 2022, then followed suit with their extended decline as the Federal Reserve sharply increased borrowing costs.
In a blog post on the Chartered Market Technical (CMT) Association’s website, Todd Stankiewicz, president and chief investment officer of SYKON Capital, noted bitcoin’s bullish trend ahead of the S&P 500 in three key events: late 2017, weeks before the COVID crash, and late 2021.
Bitcoin either moved higher or failed to make new highs while the S&P 500 advanced. In each case, the equity rally eventually stalled and reversed,” Stankiewicz said.
All things considered, the takeaway is clear: stock traders should start watching bitcoin trends closely from here.