Bitcoin faces downside risks due to stock market correlation, analyst warns

Bloomberg Intelligence senior strategist Mike McGlone has issued a warning regarding Bitcoin, suggesting the cryptocurrency is losing its status as a defensive ‘digital gold’ and is instead behaving as a high-beta asset closely tied to the stock market.

McGlone identifies three primary bearish drivers: a technical resistance level near $76,746 to $80,000, the pricing of approximately 70 basis points in additional Federal Reserve rate hikes in futures markets, and the S&P 500 trading significantly above its 200-week moving average. He notes that while Bitcoin's returns over the last five years have roughly matched the S&P 500, it has carried nearly three times the volatility, making it an inefficient trade for risk-averse investors.

In a severe bearish scenario, McGlone suggests Bitcoin could drop toward the $10,000 level, potentially triggered by a sustained 20% decline in the S&P 500. He concludes that for Bitcoin to avoid these risks, it must successfully decouple from the trajectory of traditional equity markets.