Bitcoin Price Slump Could Spark Next Bull Run

Recent bitcoin price action has caused frustration among investors. Earlier this year, Bitcoin set new all-time highs above $120,000, but it has since struggled to keep pace with equities and Gold. While the S&P 500 and precious metals have surged to record levels, Bitcoin has remained range-bound, creating the perception that it is lagging behind other assets. However, viewing the market through a lens of capital rotation suggests that Bitcoin’s underperformance might be temporary.

Despite what appears to be weakness in dollar terms, Bitcoin has outperformed both Gold’s 46% gain and the S&P 500 over the past year. Measuring Bitcoin against other assets like equities and Gold—rather than the depreciating dollar—provides a clearer picture of its real market standing. Notably, when Bitcoin is measured against the S&P 500, an interesting divergence emerges: although Bitcoin hit new USD highs in 2024, its relative value to equities remains just above its previous cycle’s peak. To reclaim its prior Bitcoin-to-S&P 500 ratio high of approximately 19.6, Bitcoin’s price would need to rise to around $135,000, given current equity levels.

The comparison between Bitcoin and Gold tells a similar story. While Bitcoin has touched new USD highs, it remains well below its previous cycle's all-time high when measured in Gold. A full recovery in the Bitcoin-to-Gold ratio would place the Bitcoin price near $150,000, and reclaiming its brief 2024 high would push it closer to $160,000. These comparisons illustrate why sentiment around Bitcoin feels muted despite record nominal prices. When evaluated against real-world stores of value, Bitcoin's purchasing power and performance still trail prior peaks.

Interestingly, an established pattern has played out across multiple market cycles: during periods when Gold experiences a sharp rally, Bitcoin has often followed with a major bull phase shortly after. This dynamic was evident in 2012, 2016, and 2020, where Gold spikes marked the early stages of capital rotation, as liquidity moved from safe havens like Gold into speculative assets such as Bitcoin. This repetitive cycle highlights the interconnected behavior of these markets over time.

The capital rotation seen in prior cycles might already be unfolding again. Gold has recently hit new highs, but its momentum is fading, while equities are strengthening. Historically, when Gold begins to underperform the S&P 500 after a major rally, it often signals the start of risk-on conditions in broader markets, favoring assets like Bitcoin. Similar to how liquidity flows within crypto—from stablecoins to Bitcoin, and then to large-cap and smaller altcoins—capital in traditional markets flows from fiat and bonds into Gold, equities, and eventually into risk assets like Bitcoin, as investor confidence increases.

Bitcoin's correlation with the S&P 500 suggests that continued equity strength could be a precursor to Bitcoin’s next price outperformance. As Gold potentially tops and equities gain momentum, the coming months may usher in a renewed risk appetite. While Bitcoin may feel stagnant now, the broader market context suggests otherwise. The same capital rotation that has marked previous cycles appears to be underway, setting the stage for Bitcoin to move from laggard to leader in the financial markets.

For a more in-depth analysis, watch our latest video: Bitcoin Is Underperforming – But Maybe Not For Much Longer. Visit BitcoinMagazinePro.com for advanced data, charts, and professional insights into Bitcoin price trends.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always conduct your own research before making investment decisions.