Recently, I noticed a very interesting phenomenon: Bitcoin’s price action seems to be sending signals to the stock market again.

Bitcoin has been sliding since its early-October high of $126,000, falling to a low of nearly $60,000. This sell-off directly triggered capital outflows from US spot ETFs. And now, while the price is holding steady around $72,000, what’s interesting is that global stock markets have started to follow suit and decline.

This is not a coincidence. Historically, Bitcoin often acts as a leading indicator for risk assets. Many traders have already realized this, and they use BTC’s price trend as a tool to judge broader market sentiment. This time, it has been validated again—after Bitcoin fell, the S&P 500, Nasdaq, European indices, and even India’s Nifty index all began to come under pressure.

Just looking at the daily chart makes it even clearer. Over the past few months, Bitcoin stayed above $100,000 for a long time, and then suddenly dropped into a bear-market range. Meanwhile, the SPDR Financial Select Sector ETF, S&P 500 futures, and the Nifty index are now replicating Bitcoin’s earlier pattern of wide-range oscillation. The synchronicity is just too obvious.

Actually, this happened before in 2021–22. At the time, Bitcoin topped near $60,000 in November 2021, and then quickly broke below $50,000 within a month. The bear market deepened further in 2022. So what happened? The S&P 500 and Nasdaq didn’t reach their peaks until two months later in January 2022, and then they also began a long decline.

In an analysis, Todd Stankiewicz, Chief Investment Officer at SYKON Capital, pointed out that Bitcoin has three key moments that lead the stock market in reaching peaks: late 2017, a few weeks before the COVID crash, and late 2021. Each time, Bitcoin either saw a pullback or failed to make new highs, while the stock market kept rising. But in every case, the stock market’s rebound eventually stalled and reversed.

What’s happening now is that tensions in Iran and a surge in oil prices are putting heavy pressure on Asian and European indices. The DXY/US Dollar Index (DXY) is rising, and stock market sentiment is deteriorating. And Bitcoin has already sent the signal in advance.

For stock traders, it’s time to closely watch Bitcoin’s trend. This crypto asset is often described as a store of value, but in actual trading, it behaves more like a barometer for the entire risk-asset market.

Also, Bhutan’s recent moves are worth noting. Quietly, the country sold about 70% of the Bitcoin it held as of October 2024, cutting its holdings from 13,000 coins to 3,954 coins. It also appears that its hydropower mining plan has slowed down, with no major new capital inflows for more than a year. This reflects the economic pressure that small countries face when operating Bitcoin mining at current prices and mining difficulty. By contrast, many large institutions and sovereign funds are increasing their holdings of cryptocurrencies and gold—an interesting comparison in itself.