MW Investors may feel like chasing bitcoin higher this spring. Here are this year's unique dangers.
By Frances Yue
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***
Welcome to the final installment of Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.
Some investors are looking forward to a spring fling with bitcoin. But uncertainty around President Donald Trump's tariff plans, seasonality factors from May to October that could be unfavorable for risk assets, and a ominous sign forming from a technical perspective should all make anyone proceed with caution this year.
To kick things off, risk assets have endured a tough patch, and some investors are no doubt wondering if it's time to jump back in. Bitcoin (BTCUSD) reached a record high at $109,225 on Jan. 20, the day of Trump's inauguration, but has since pulled back over 20% to slightly above $86,500 on Wednesday.
Earlier this month, the S&P 500 SPX fell into the correction territory, defined as a 10% decline from a recent peak.
This week, we look at whether the recent pullback in risk assets has created a buying opportunity - or if the selloff could have more room to go.
Find Frances Yue on X or reach her at frances.yue@marketwatch.com to share your thoughts on crypto prices, or your journey with Distributed Ledger.
Moving in tandem
Though bitcoin bulls have argued that crypto may one day serve as a store of value, it hasn't been behaving like one. Instead, it has been trading mostly in tandem with U.S. stocks for the past few years - and especially in the past few days, as both stocks and crypto reacted to macroeconomic uncertainties as the White House tackled its policy agenda.
Some investors have feared that Trump's tariff plans may lead to upward pressure on inflation and hinder the Federal Reserve from cutting its policy interest rate much further. There's also been growing concern about the potential for the U.S. economy to slip into a recession.
Though this, the 30-day rolling correlation between bitcoin and the S&P 500 has been hovering above 0.8 for the past two weeks, according to data from crypto news and data website the Block. Correlation is measured on a scale from -1 to +1, with +1 indicating a perfect positive correlation and -1 indicating a perfect negative correlation. 0 suggests no correlation.
This suggests that both assets could either continue to selloff or recover in tandem, rather than acting as the diversifier some investors might desire.
Furthermore, there appears to be a lack of catalysts specific to crypto at the moment to help push bitcoin's price higher. Investors already priced in a U.S. strategic bitcoin reserve, noted Martin Leinweber, director of digital-asset research and strategy at MarketVector Indexes - pointing to Trump's announcement on March 6.
Crypto investors will need to see more concrete policies that are friendly to digital assets to see bitcoin's price advance further, Leinweber said.
On the flip side, seasonality may start to temporarily favor stocks and crypto in the second quarter, especially in April, noted analysts at crypto trading firm QCP Capital. But it could be a relatively narrow window.
Based on data dating back to 1928, the S&P 500 has historically logged its second-best quarterly performance in the second quarter, with an average return of 2.3% - trailing only the fourth quarter, when the index has seen an average return of 2.8%, according to Dow Jones Market Data. Meanwhile, April has historically been one of the best-performing months for the S&P 500, with the index posting an average gain of 1.3% and registering a positive return on the month 63.9% of the time.
The second quarter has also been bitcoin's second-best-performing quarter, with the crypto recording a 30% gain on average, based on data dating back to December 2015. Still, having launched in 2009, bitcoin has a relatively short history, and its historical price data may not be meaningful enough.
Yet any tailwinds from seasonality may also be fleeting given the adage to "sell in May and go away," which refers to the historically weaker performance of stocks from May to October compared with the other half of the year.
Some technical analysts have also noted that any relief rally for stocks and crypto may be short-lived. (I've written more about that here.)
For now, investors have been closely watching any developments on Trump's tariff plans, especially as the April 2 deadline for new tariffs on a wide range of imported goods approaches.
Read: Trump's April 2 tariffs: What we know so far as the White House shifts its strategy
A death cross?
If that wasn't enough to chew on, bitcoin also faces the potential danger of forming a "death cross" pattern soon - an ominous sign from the technical perspective.
A death cross suggests that an asset's recent price action is weakening in relation to longer-term price trends. It forms when the 50-day moving average crosses below the 200-day moving average.
Bitcoin's 50-day moving average stood at $89,775 on Wednesday afternoon, while its 200-day moving average was at $85,384.
Crypto in a snap
Bitcoin (BTCUSD) gained 3% over the past seven days to trade at around $86,666 at last check Wednesday. Ether (ETHUSD) fell 1.3% over the past seven days to around $2,007, according to Dow Jones Market Data.
Must-reads
-- Why GameStop is trying to be the next MicroStrategy with its bitcoin move (MarketWatch)
-- Trump Media's next move is to launch ETFs alongside a crypto partner (MarketWatch)
-- Trump's Crypto Venture Introduces a Stablecoin (The New York Times)
-- Fidelity Investments tests dollar-pegged stablecoin (Reuters)
-Frances Yue
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March 26, 2025 18:19 ET (22:19 GMT)
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