After a Major Dip, Bitcoin Recovered Somewhat with a Daily Hike of 6.75%

Crypto could decline further if the S&P 500 Index drops by a predicted 5%

Since the inauguration of President Donald Trump and the subsequent trade wars, U.S. markets have suffered significant losses across the board.

In the face of uncertain macroeconomic conditions and political issues, the U.S. market is seeing a strong decline. As expected, these market conditions have considerably affected the wider crypto market, with Bitcoin dropping to its pre-election levels on the charts.

These prevailing conditions have left stakeholders talking about Bitcoin’s trajectory and its reaction to U.S. market volatility.

In fact, according to CryptoQuant’s Axel Adler, the S&P 500 is set to register another loss of 5% before the market stabilizes. The analyst believes this is worrying for the crypto market, especially since Bitcoin has an 80% correlation with the S&P 500 Index.

Hence, based on this analogy, Bitcoin could decline as well if the U.S. market continues to report losses.

S&P 500 Erases Post-Election Gains

The decline in the S&P 500 has seen major indices erase their post-election gains, currently at their pre-election levels (November 2024). For example, the S&P 500 index has fallen by 45.22 points over the last 5 days alone.

This trend has persisted across the wider markets too. The Nasdaq 100 saw all gains erased, going back to July 2024, while the S&P 500 and Dow Jones are now trading at Q4 2024 levels. Equally, the mid-cap S&P 400 erased its gains since March 2024, with the same recently hitting a yearly low too.

This trend is a product of recently released data from the CPI, the Consumer Index FOMC meetings, and political conditions. With the whole U.S. market dipping, the trend has heavily affected the crypto market, evidenced by both Bitcoin and altcoins recording massive losses across the board.

Bitcoin’s Reaction to Market Volatility

Bitcoin tends to react strongly to U.S. market volatility. For instance, when the S&P 500 fell by 45 points, BTC also declined to hit a 4-month low. As the S&P 500 recovered by 1.59% in the next 24 hours, so did Bitcoin. Notably, BTC’s recovery was worth 6.74%, allowing it to reclaim $84k on the charts.

This connection appears due to U.S. investors—both institutions and individuals. This is evidenced by a negative Coinbase premium index, which has remained so for the past week. The drop in the S&P 500 index coincided with a weekly long drop in the Coinbase index, indicating that U.S. investors, especially institutions, are now bearish. Thus, sellers dominate both stock and crypto markets. A strong recovery for the U.S. market will likely lead to considerable gains for Bitcoin.

Therefore, since the S&P 500 index is currently rising as the markets start to cool down, we could see Bitcoin’s price recover. At this level, a recovery could see BTC reclaim $86k, which will strengthen the crypto’s attempt to hit $90k again. However, if the U.S. market sees more negative news, more depreciation may be on the horizon.