Bitcoin Faces Potential Decline Amid Renewed Correlation with U.S. Equities

Bitcoin (BTC) has reversed much of its gains driven by the US-Iran conflict, aligning once again with the broader downtrend observed in risk assets, particularly U.S. equities. According to Cointelegraph, Bitcoin's correlation with the S&P 500 has historically preceded average declines of approximately 50% since 2018. This renewed correlation signals a heightened risk of further downside in the Bitcoin market, as BTC is vulnerable to a broader risk-asset sell-off due to increasing macroeconomic pressures. As of Sunday, BTC/USD had decreased by 5.65% week-to-date, reaching approximately $68,700, while the S&P 500 (SPX) concluded the week with a 1.90% decline. The bearish warning for Bitcoin emerges from a weekly correlation metric comparing BTC and the S&P 500, the U.S. equity benchmark index. As of Saturday, the 20-week rolling correlation between BTC and SPX was 0.13, rising from its recent low of around -0.5. Since 2018, such sharp recoveries in BTC-SPX correlation have preceded broader Bitcoin market declines, averaging about -50%. Analyst Tony Severino noted, "It is a warning sign that the stock market is going to collapse and take BTC with it." A 50% drop from Bitcoin's current price would suggest a downside target of roughly $34,350 if historical patterns repeat. Multiple analysts have projected Bitcoin to fall as low as $30,000–$40,000 in 2026. In 2020 and 2022, Bitcoin's declines lagged by several months, occurring after classic "bull traps" where BTC rallied alongside rising SPX correlation before reversing and erasing those gains. Macro conditions, including elevated oil prices, inflation, and reduced likelihood of the Federal Reserve cutting interest rates, contribute to the bearish outlook for Bitcoin and equities in the coming months. Bitcoin's renewed correlation with equities coincides with a pause in corporate accumulation. Strategy (MSTR), one of the largest Bitcoin holders, has not purchased BTC through the sales of its STRC preferred stock this week, according to data resource STRC.LIVE. Strategy's last acquisition, announced on March 16, added 22,337 BTC valued at $1.57 billion, bringing total holdings to 761,068 BTC. Bitcoin rallied by approximately 10.50% during the same period, outperforming U.S. stocks. Strategy's STRC-fueled buying supported Bitcoin's rally during the US-Iran conflict. With no new purchases this week, BTC is more exposed to the potential sell-off in stocks.