Bitcoin has surrendered most of the gains it made following the US-Iran conflict, falling back into alignment with a broader decline in risk assets like US stocks. Analysts warn that Bitcoin’s renewed positive correlation with the S&P 500 has historically preceded significant price drops, averaging around 50% since 2018. This shift coincides with a pause in corporate buying from major holder MicroStrategy, potentially exposing BTC further to a wider market sell-off.
Bitcoin erased most of its geopolitical-driven gains this week, moving back in sync with a broader downtrend in risk assets. As of Sunday, BTC had fallen 5.65% week-to-date to approximately $68,700, while the S&P 500 closed the week down 1.90%.
The renewed correlation now signals a greater risk of further downside for Bitcoin. A sharp recovery in the 20-week rolling correlation between BTC and the S&P 500 has historically preceded broader Bitcoin market declines averaging about -50%.
Analyst Tony Severino stated “It is a warning sign that the stock market is going to collapse and take BTC with it.” A 50% drop from current levels would imply a downside target near $34,350, aligning with other projections for 2026.
Macro conditions, including elevated oil prices and lower odds of Federal Reserve rate cuts, support a cautious outlook. Bitcoin’s price action in 2020 and 2022 saw declines lag by several months after similar correlation rallies reversed.
The correlation shift coincides with a pause in accumulation from MicroStrategy. According to data resource STRC.LIVE, the firm has not purchased BTC this week using proceeds from its preferred stock.
Its last major acquisition on March 16 added 22,337 BTC worth about $1.57 billion, supporting Bitcoin’s rally. With no fresh purchases, BTC appears more exposed to a potential sell-off in equities driven by rising macro pressures.
