Key Points
- Bitcoin’s value has been affected by the decline in the U.S market, falling to pre-election levels.
- The S&P 500 Index is predicted to drop another 5%, which could further impact Bitcoin’s value.
After a significant drop, Bitcoin experienced a slight recovery with a daily increase of 6.75%.
However, if the S&P 500 Index falls by the projected 5%, the cryptocurrency could face further declines.
Effects of Trade Wars and Political Issues
The U.S markets have seen substantial losses since President Donald Trump’s inauguration and the ensuing trade wars.
Uncertain macroeconomic conditions and political issues have resulted in a strong decline in the U.S market.
This has significantly affected the wider crypto market, causing Bitcoin to drop to its pre-election levels.
The current market conditions have sparked discussions about Bitcoin’s path and its response to U.S market volatility.
CryptoQuant’s Axel Adler predicts that the S&P 500 will suffer another 5% loss before the market stabilizes.
This prediction is concerning for the crypto market as Bitcoin has an 80% correlation with the S&P 500 Index.
Therefore, if the U.S market continues to report losses, Bitcoin could also decline.
S&P 500 and Crypto Market Trends
The S&P 500’s decline has resulted in major indices erasing their post-election gains and returning to pre-election levels.
The S&P 500 index has fallen by 45.22 points in the last 5 days alone.
This trend is reflected in the wider markets as well.
For example, all gains made by the Nasdaq 100 since July 2024 have been erased, and the S&P 500 and Dow Jones are now trading at Q4 2024 levels.
Similarly, the mid-cap S&P 400 has erased its gains since March 2024 and recently hit a yearly low.
This trend is due to recently released data from the CPI, the Consumer Index FOMC meetings, and political conditions.
The U.S market dip has significantly affected the crypto market, as evidenced by massive losses recorded by both Bitcoin and altcoins.
Bitcoin is known for its strong reactions to U.S market volatility.
For instance, when the S&P 500 fell by 45 points, BTC also declined, hitting a 4-month low.
However, as the S&P 500 recovered by 1.59% in the next 24 hours, Bitcoin also recovered, increasing by 6.74% and reclaiming $84k on the charts.
This correlation is due to U.S investors, both institutions, and individuals.
The negative Coinbase premium index, which has remained so for the past week, supports this.
The S&P 500 index’s drop coincided with a weekly long drop in the Coinbase index, indicating that U.S investors, especially institutions, are bearish.
As a result, sellers are dominating both the stock and crypto markets.
Thus, if the U.S. market recovers strongly, Bitcoin could also see significant gains.
If the S&P 500 index continues to rise as the markets start to cool down, Bitcoin’s price could also recover.
At this level, a recovery could see BTC reclaim $86k, which would bolster the crypto’s attempt to hit $90k again.
However, if the U.S market receives more negative news, further depreciation may be imminent.
