Bitcoin collapse: why it could be a harbinger of a US market crash

On the night of February 6, bitcoin collapsed to the level of $60 thousand, falling to the level of September 2024. Rustam Botashev, Partner and Investment Director of Blockreign Fund, believes that the world's main cryptocurrency may have found a practical use - it may become a leading indicator that can be used to predict the movement of the stock market.

Since the beginning of the year, the price of the world's most popular cryptocurrency has fallen by about a quarter. On February 6, bitcoin is trading around $66.5 thousand, although it started the year at around $88 thousand.

Such a rapid fall was not from some exorbitant heights, but, as it seemed three weeks ago, from the bottom. From the "bottom" that bitcoin reached in late November, having already lost a third of its maximum value. From the "bottom", on which it seemed to be fixed and began to consolidate. But it did not hold on. As a result, in four months bitcoin lost more than half of its value from the maximum reached on October 6, 2025 - $126.2 thousand. Such a sharp and amplitude fall has not been since 2021.

In all likelihood this is not a correction, not a technical sell-off, but a bear market, and the recovery will not be quick.

One can spend a long and fruitful time looking for explanations for this collapse, blaming US President Donald Trump, thanks to whose policies the cryptocurrency market skyrocketed, investors taking money out of bitcoin-ETFs, traders with their leverage, triggered margin calls and short-squeezes. You can also attribute everything to the upcoming changes at the Fed - Trump previously nominated Kevin Warsh as the next Fed chief. He was in favor of reducing the Fed's balance sheet, a factor that previously supported cryptocurrencies by bringing liquidity to the markets.

There are plenty of suitable reasons, and many have already spoken out about them in recent days.

But in my opinion, there can be only one reason for what is happening in the cryptocurrency market. And that is the impending economic downturn.

I risk to put forward this hypothesis: bitcoin has become a leading indicator for the U.S. stock market. And the stock market, as we know, is one of the main leading indicators for predicting changes in the economy. Why the U.S.? Simply because it is the largest economy and the largest stock market. Any movement in the U.S. market has serious consequences for markets around the world.

If my hypothesis is correct, then there is no point in looking for explanations for the current decline, because those explanations are not the causes of the decline, they are rather its triggers. And the cause, as stated above, is the impending recession.

One could, of course, argue that bitcoin is simply behaving like an overheated tech stock, and one that was bought with leverage. And tech stocks should feel worse late in the economic cycle. Even so, again, the reason for bitcoin's decline is not the bitcoin itself, but the macroeconomy.

Although the Nasdaq hasn't fallen that much recently and is now trading just 6% below its high. In other words, bitcoin is more of a leading indicator.

Such reasoning does not contradict the thesis that bitcoin price growth is tied to stock growth. It's just that now, apparently, the connection is reversed, bitcoin shows where the classical market will move, not vice versa. The tail is wagging the dog.

In this case, we should see the S&P 500 fall in the near future. And not a short-term correction, but a prolonged multi-month collapse by at least 20%. So far we do not see such signs. Since the beginning of the year, the index has lost less than 1%, and over the last five days - almost 2.5%. But in January it set several price records.

Predicting the direction of the stock market is much more profitable than predicting macroeconomic developments. If bitcoin is really going to be a leading indicator for the stock market, this will be one of its best uses (use case).

All in all, though, we can say that bitcoin has a dismal outlook this year. There may not be a recession, but the stock is likely to fall.

And bitcoin will not grow in a falling or stagnant market. To simply cover the already current losses of market players, bitcoin would have to grow by about 40% of the current values. Quite an optimistic forecast under the current circumstances. So I will risk worsening my own forecast of no rapid growth to no growth as such.

This article was AI-translated and verified by a human editor