Bitcoin (BTC) Dragged Down by U.S. Stock Market: Will a Bigger Crash Follow?

Bitcoin (BTC) is currently trading at just under $82,000, while the S&P 500, 2% down on Friday, is still heading southwards due to the huge uncertainty over the Trump tariffs. Could this downturn take on a snowball effect and lead to a much more serious crash?

Stock market and crypto market in fear

Market sentiment is plumbing the bottom over recent weeks. In traditional markets Fear and Greed has dipped into ‘Extreme Fear’ as the S&P 500 fell through major support on Friday, down a huge 2% for the day. In the crypto market things are similar, as the dial in the Fear and Greed Index hovers at a ‘Fear’ reading of 34. 

With seemingly no end to the Trump strategy of slapping tariffs on friend and foe alike, the markets are just not able to predict what is going to happen as 2025 unfolds, and with uncertainty being the worst possible outlook for markets, the stock market is acting accordingly.

S&P 500 falls through support

Source: TradingView

After looking as though it might have found a bottom at the $5,635 level, the S&P 500 dipped down through this level on Friday, reaching $5,580. With a new weekly candle about to open below the support, this stock market could now fall to the low $5,000 region, and even face the possibility of going all the way back to the $4,800 high set in January 2022. That said, the Stochastic RSI is right at the bottom, and this will likely signal a bounce. It just remains to be seen whether this bounce would be strong enough to take the price back into the ascending channel once more.

Gold is acting like the traditional flight to safety

Source: TradingView

While the S&P 500 breaks down, gold, the traditional flight to safety, has just done a remarkably bullish thing and has broken out of the top of its own ascending channel. With gold making new all-time highs on practically a weekly basis, why is Bitcoin at such a low ebb?

Bitcoin falls out of channel on short-term time frame

Source: TradingView

The 4-hour Bitcoin chart shows the breakdown of the ascending channel, and that the price has descended to the 0.618 Fibonacci at $81,340. The measured move for the breakdown is to $80,200, so this is still a possible downside target. With the stock market likely to open in the red on Monday, it remains to be seen how much further Bitcoin can be dragged down.

Bitcoin approaches decision time: bounce or collapse?

Source: TradingView

The weekly time frame shows how Bitcoin is getting nearer to the important decision point. The price will either fall through the $80,000 horizontal support, and potentially carry on down to $70,000, or it will turn back up and break through the descending trendline.

Two very big factors that will help to decide the direction of $BTC is the RSI and the Stochastic RSI. The RSI is displaying the extremely strong support (orange line) at the level of 44.00. If the indicator line falls through this, it will be very consequential. Also, the Stochastic RSI is showing that the indicator lines are possibly beginning to roll over. While not as drastic as the RSI losing that 44.00 structural support level, if the Stochastic RSI crosses back down it will signal further downside momentum.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.