Bitcoin Faces Turbulent 2025 as Market Correlation with Equities Deepens
Bitcoin’s rollercoaster year of record highs and steep sell-offs is drawing to a close with the world’s largest cryptocurrency at risk of posting its first annual decline since 2022. Despite early gains driven by optimism around U.S. President Donald Trump’s crypto-friendly policies, a series of policy shocks and market corrections have left traders facing a volatile end to 2025.
From Record Peaks to Market Plunge
Bitcoin rose sharply in the first quarter, buoyed by a surge of institutional and retail investment and expectations of looser regulation under Trump. It reached an all-time high above $126,000 in early October. However, the optimism evaporated days later when new tariffs on Chinese imports and potential export controls on key software triggered a market collapse, erasing billions in leveraged crypto positions.
The October 10 sell-off, which led to more than $19 billion in liquidations, became the largest in crypto history. Since then, bitcoin has struggled to recover, hovering around $89,000 this week. According to Derive.xyz, November marked its steepest monthly drop since mid-2021, though bearish sentiment in the options market has eased slightly in recent weeks.
Analysts Caution of a Possible ‘Bitcoin Winter’
Despite ongoing institutional interest, sentiment among major crypto backers has cooled. Michael Saylor’s company, Strategy, which holds the largest corporate bitcoin reserve, had projected a year-end price of $150,000. That target now looks distant. Strategy CEO Phong Le warned in November of a potential “bitcoin winter,” signalling a more cautious tone.
Saylor, however, told Reuters that his firm could withstand even a 95% fall in bitcoin’s value, underscoring his long-term confidence. Standard Chartered, once among the most bullish banks on crypto, revised its forecast in October, predicting bitcoin could dip below $100,000 before stabilising.
Rising Correlation with Stock Markets
The events of April and October exposed a stronger link between bitcoin and traditional equities, particularly artificial intelligence stocks. Historically, crypto assets moved independently of the broader market, but 2025 data from LSEG shows bitcoin’s average correlation with the S&P 500 rose to 0.5, up from 0.29 in 2024. For the NASDAQ 100, the correlation climbed to 0.52 from 0.23.
“Crypto reacting to broader equities has been a consistent theme in 2025,” said Jasper De Maere, strategist at trading firm Wintermute. Analysts attribute this alignment to mainstream investor participation and heightened sensitivity to economic data, interest rate expectations, and speculative trends tied to AI-related stocks.
“Things really started to break in risk markets because of the AI bull case coming under question,” said Cosmo Jiang, a general partner at Pantera Capital.
Interest Rate Outlook and the Fed’s Role
Monetary policy has also become a crucial driver for bitcoin. Analysts note that while past Federal Reserve rate cuts have not directly boosted crypto prices, dovish signals often coincide with rallies across risk assets. Hawkish remarks in October contributed to bitcoin’s decline, but recent data now suggests an 86% probability of a 25-basis-point rate cut this week.
“The Fed’s support of monetary supply in this scenario is going to be an indicator that crypto is all looking at,” said Mo Shaikh of Maximum Frequency Ventures.
As 2025 nears its end, bitcoin’s performance appears increasingly tied to the same forces shaping stock markets — investor sentiment, central bank policy, and confidence in AI-driven growth. Whether it closes the year below $80,000 or stages a late rebound, bitcoin’s growing integration with traditional markets signals a new, more complex phase in its evolution.
with inputs from Reuters