The global sell-off in financial markets sparked by the new Trump tariffs has brought out the Bitcoin (BTC +3.61%) bears. The current thinking is that Bitcoin could get hammered by a mix of lower economic growth, rising inflation, and overall market uncertainty.
But how much of this bearish forecast is really just a case of investors overreacting? After all, as many crypto investors are now pointing out, there are no tariffs on Bitcoin. To understand where Bitcoin is headed next -- it's now down almost 30% from its all-time high of $109,000 in January -- you need to ask yourself three key questions.
Is Bitcoin still a safe-haven asset?
For much of its history, Bitcoin has been referred to as digital gold, given that it shares some of the same characteristics as physical gold. Bitcoin, for example, is inherently scarce, given that its total lifetime supply is capped at 21 million coins. Almost 20 million coins are already in circulation, so 95% of all the Bitcoin that is ever going to exist already exists.
Moreover, Bitcoin is inherently a disinflationary asset due to an algorithmically controlled event known as halving, in which the reward for mining new Bitcoin is cut in half every four year. Add in the fact that the typical image used to depict Bitcoin -- a nice, shiny gold coin -- creates a mental image of Bitcoin as being the perfect safe asset.
CRYPTO: BTC
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But is it? During the 2022 stock market decline, Bitcoin did not hold up at all as a store of value. For the year, the S&P 500 was down 18%, but Bitcoin was down 64%. Gold, on the other hand, held its value, up a modest 0.4%.
In early 2023, though, Bitcoin did prove its worth during the regional banking crisis. At that time, there was a clear flight to safety, and investors moved into Bitcoin. The thinking then was that Bitcoin was relatively insulated from the traditional financial system, and that it was safer to put your money into Bitcoin than into a U.S. bank.
So you can see where I'm going with this -- 2025 is shaping up to be the ultimate test for Bitcoin. For the year, gold prices have surged past the $3,000 mark, while Bitcoin is down almost 30% from its high. So let's see what happens next. If investors continue to pile into gold, but give up on Bitcoin, then all those store-of-value and digital-gold theories might turn out to be pure bunk.
Is Bitcoin really just an expensive tech stock?
And that leads us to the primary reason investors should be worried about Bitcoin right now: It's starting to behave more and more like a volatile tech stock. Historically, this was never the case. Bitcoin was largely uncorrelated with every major asset class, and that included tech stocks.
Back in 2024, WisdomTree analyzed Bitcoin's correlation with eight major asset classes from 2012 to 2023. During that period, Bitcoin's typical correlation with tech stocks was between 0.2 and 0, indicating minimal correlation. At other times, it actually displayed negative correlation. In other words, Bitcoin increased in value when tech stocks declined in value.
But what's happening in 2025 is truly different. According to a new study by Standard Chartered, the correlation between Bitcoin and tech stocks was as high as 0.8 earlier in the year, and is now about 0.5. That's extraordinarily high from a historical perspective.
Image source: Getty Images.
So what will happen in 2025? If you've been watching the chaos in the stock market in the immediate aftermath of the Trump tariff announcement, you'll understand why I'm so concerned right now. Tech stocks were deep in the red. So if Bitcoin is correlated with tech, and if tech is heading lower, then does that mean Bitcoin is also headed lower?
How low is too low for Bitcoin?
It can also be instructive to take a look at online prediction markets, where people are making forecasts about the future price of Bitcoin. People are putting down real cash to make these predictions, so if you believe in the wisdom of crowds, it's worth hearing what they have to say.
Based on results from the Kalshi online prediction market, the crowd thinks that Bitcoin has a 63% chance of falling below $70,000 and a 34% chance of falling below $60,000. Put another way, Bitcoin has a 1-in-3 chance of losing as much as another 24% of its value from its recent price of about $78,500.
I've used the term "the crowd" here intentionally. That's because there has always existed a fundamental tension between "the crowd" and "experts" (i.e., people who get very expensively compensated on Wall Street). Each claims to know better than the other.
So do with these online predictions what you want. Maybe they are entirely worthless. After all, some experts are still calling for Bitcoin to hit $200,000 this year. Some even think that Bitcoin could hit $250,000 by the end of 2025.
From my perspective, $70,000 is the key price level for Bitcoin. This is about the same price that Bitcoin was trading for on Election Day. So, even though the price decline of Bitcoin has been unexpected this year, a price of $70,000 really just means we are back to square one. I'm still long-term bullish on Bitcoin, and will use a price of $70,000 as a signal to scoop up more Bitcoin on the cheap.
