Many see bitcoin as a safe haven asset and store of value, like gold. But some currency traders treat it as a leading indicator of the broader market mood, and they have been proven right again: Before recently finding stability near $70,000, bitcoin plunged sharply, foreshadowing the current global stock market crash.
The price of Bitcoin reached a high of over $126,000 in early October and began to fall, reaching lows near $60,000 early last month. The sell-off was characterized by rapid outflows from US-listed spot ETFs. CoinDesk pointed this out in January, questioning whether these flows, in the absence of a clear crypto trigger, indicated an upcoming macroeconomic explosion and stock market sell-off.
Fast forward to today: global market sentiment has worsened, with the Iran war and rising oil prices weighing heavily on Asian and European indices. The S&P 500 and Nasdaq have also come under pressure as the dollar index gains. Meanwhile, bitcoin has remained stable around $70,000.
Here’s where it gets even more interesting: key stock indices like the S&P 500 mirrored Bitcoin’s back-and-forth trading before the crisis over a wide range.
Bitcoin remained above $100,000 for months in this volatile and expanding channel before sinking into bearish territory. An identical setup has developed in the SPDR Financial Select Sector ETF (XLF), India’s Nifty (among the worst hit), and S&P 500 futures.
2021-22 Replay
This is not the first time bitcoin has led 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 to below $50,000 within a month. The bear market deepened into 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, in a blog post on the Chartered Market Technicial (CMT) Association website, noted bitcoin’s tendency to peak ahead of the S&P 500 at three key moments: late 2017, weeks before the COVID crisis, and late 2021.
“Bitcoin fell or failed to reach new highs while the S&P 500 advanced. In each case, the stock rally eventually stalled and reversed,” Stankiewicz said.
Considering all this, the conclusion is clear: stock traders should start watching bitcoin trends closely from here.
