Bitcoin (BTC) has faced formidable challenges recently, with its value plummeting over 20% since its peak in mid-March. Meanwhile, U.S. stocks, exemplified by the Nasdaq Composite and the S&P 500, have been on a consistent upward trajectory. Both indices closed positively for the seventh straight day on Wednesday, reaching unprecedented heights. According to MarketWatch, the S&P 500 notched its 37th record close of 2024, while the Nasdaq achieved its 27th.

A report from The Block highlighted that bitcoin’s correlation with these indices had plummeted to multi-month lows, reaching -0.84 with the Nasdaq and -0.82 with the S&P 500. (A reading of -1 indicates that they are moving in completely opposite directions by the same magnitude.)

Today, however, this scenario has shifted. All are moving in tandem, but regrettably for the crypto bulls, this synchronization coincides with a significant downturn in stocks. By midday in New York, the Nasdaq had fallen by 1.8%, and the S&P 500 by 0.9%. Bitcoin, which earlier in the session had surged past $59,000 following favorable U.S. inflation data, had subsequently dropped by 0.6% to $57,500. The broader CoinDesk 20 Index also decreased by 0.4%.

According to Joel Kruger, market strategist at the LMAX Group, cryptocurrencies might face additional declines if the equity market’s rough day morphs into a broader correction. In a morning update, Kruger noted, “At present, the most significant risk to crypto assets is the potential for highly overbought U.S. equities to experience a downturn. While the correlation is not absolute, there is evidence suggesting that a sharp decline in stocks could temporarily affect crypto as well.”