– How can investors protect themselves during a downturn in Bitcoin and stock markets?

Bitcoin Struggles Against Stock Market: Analyst Predicts Continued Decline as Cycle Concludes

Bitcoin’s latest market action is testing the conviction of even long-term believers. While U.S. equities, especially tech and AI-linked stocks, have pushed to repeated all-time highs, Bitcoin has lagged, triggering renewed debate over whether the current BTC cycle is topping out or simply pausing before another leg up.

Some macro-focused analysts now argue that Bitcoin may continue to underperform the stock market as this cycle matures, driven by shifting liquidity, regulatory overhang, and changing investor behavior in a post-ETF world. For crypto-native builders and investors, understanding this dynamic is critical for navigating the rest of the 2024-2025 cycle.

Macro Backdrop: Why Bitcoin Is Underperforming Equities

Bitcoin’s struggle against the stock market is less about on-chain fundamentals and more about macro flows, monetary policy, and risk sentiment.

Diverging Performance: BTC vs. Major Equity Indices

Over recent months, major stock indices like the S&P 500 and Nasdaq have been buoyed by:

• Strong earnings from AI and cloud leaders
• Persistent expectations of eventual rate cuts by the Federal Reserve
• Massive capital inflows into “Magnificent 7” tech stocks

Bitcoin, by contrast, has seen:

• Slowing net inflows into U.S. spot Bitcoin ETFs
• Rising profit-taking from long-term holders after new all-time highs
• Increased correlation with risk-off events during macro shocks

A simplified comparison (illustrative, not exact price points):

The result: BTC’s relative strength (BTC performance vs. equity indices) has deteriorated, despite a supportive long-term narrative around digital scarcity and institutional adoption.

Analyst View: Why a Continued Bitcoin Decline Is on the Table

Several macro and crypto analysts argue that the current cycle may be entering its late stage, with downside or sideways action likely before a fresh secular uptrend. Their thesis typically revolves around three pillars:

1. Post-Halving Cycles May Be Stretching Out

Historically, Bitcoin’s four-year halving cycle has led to:

1. Pre-halving accumulation
2. Post-halving breakout
3. Parabolic blow-off top
4. Deep bear market

But as the asset has matured and institutional capital has entered:

• Volatility has compressed
• Cycle tops and bottoms have become “flatter”
• Time between major impulses appears to be lengthening

Some analysts interpret today’s price action as a late-cycle topping structure rather than mid-cycle consolidation.

2. Liquidity Rotation Back to TradFi and AI

Global liquidity remains the key driver of speculative assets. With trillions of dollars now chasing:

• AI infrastructure (GPUs, data centers, cloud)
• Large-cap tech equities
• Corporate credit and buybacks

Bitcoin must compete for risk capital with narrative-rich, earnings-generating companies rather than just other digital assets.

Key headwinds include:

• Attractive yields in Treasuries and money markets
• Lower urgency for inflation hedges as headline inflation cools
• AI perceived as a “safer” growth story than permissionless crypto

3. ETF Normalization and “Sell the News” Dynamics

The U.S. spot Bitcoin ETF approvals in early 2024 were a structural milestone-but not a guaranteed short-term bull engine forever.

Analysts highlight:

• Early strong inflows followed by periods of stagnation or net outflows
• Legacy holders using ETF-driven rallies to distribute at higher prices
• Retail “buy the rumor, sell the news” behavior after the ETF hype peak

As ETF flows normalize, Bitcoin’s upside becomes more dependent on organic demand growth and macro tailwinds rather than one-off catalysts.

On-Chain and Market Structure: What the Data Suggests

For a crypto-native audience, on-chain and derivative metrics are especially important in assessing whether the cycle is ending or merely pausing.

1. Long-Term Holder Behavior

Key signals to monitor:

• Long-Term Holder (LTH) SOPR: Elevated profit-taking suggests distribution into strength.
• Coin Days Destroyed: Spikes indicate older coins moving, often near local or macro tops.
• Realized Cap & MVRV: High MVRV ratios can signal overheated market conditions.

As of 2025, data has shown periods where:

• LTHs reduced holdings into price strength
• Realized profits rose sharply around peak rallies

Both are consistent with late-cycle dynamics, or at least with a maturing impulse.

2. Derivatives and Leverage

Bitcoin derivatives markets continue to influence spot prices:

• Elevated funding rates tend to precede sharp corrections
• Growing open interest without spot demand can create fragility
• Options skew shifts (puts vs. calls) show rising demand for downside protection in risk-off periods

These signals support the view that BTC remains vulnerable to macro shocks, especially when speculative leverage is high.

Bitcoin vs. Web3: Impact on Builders, DeFi, and Layer-2 Ecosystems

Even as Bitcoin struggles against the stock market, broader web3 and blockchain innovation continue to advance.

For Bitcoin-Focused Builders

The emerging Bitcoin L2 and programmability wave-Ordinals, Runes, BitVM, and Bitcoin rollup concepts-offers new narratives:

• Expanded use cases beyond “digital gold”
• Fee market diversification via inscriptions and non-fungible primitives
• Potential DeFi and NFT-style ecosystems anchored to Bitcoin security

However, a prolonged BTC price decline or stagnation could:

• Reduce speculative capital for BTC-native projects
• Slow experimentation if miner and developer incentives weaken
• Shift attention to chains with higher throughput and composability

For DeFi and Multichain Web3

If Bitcoin underperforms equities and even some altcoins:

• Capital may rotate into higher-beta L1s and L2s (Ethereum, Solana, modular ecosystems)
• DeFi yields and liquidity could remain more attractive outside Bitcoin
• Cross-chain protocols and BTC-wrapping solutions (e.g., trust-minimized BTC on other chains) may gain relevance

For web3 builders, this environment rewards:

• Cross-chain interoperability
• Real revenue generation (fees, MEV, infra services)
• Products that benefit from volatility (perps, options, structured products)

How Crypto Investors Can Navigate a Late-Cycle Bitcoin Environment

If the “cycle conclusion” thesis plays out and Bitcoin continues to struggle relative to stocks, crypto investors may adapt by focusing on:

1. Risk Management First
• Use position sizing, stop-losses, and scenario planning
• Diversify across BTC, high-conviction L1s/L2s, and stablecoin yield strategies

2. Time Horizon Alignment
• Long-term thesis: Bitcoin as censorship-resistant, hard money infrastructure
• Short-term reality: Correlated to risk assets and liquidity cycles

3. On-Chain Edge
• Track LTH behavior, ETF flows, and stablecoin supply
• Use analytics tools (Glassnode, CryptoQuant, Dune dashboards) to gauge cycle health

4. Building Through the Chop
• For founders and devs, volatility periods are often ideal for:
• Shipping protocol upgrades
• Designing sustainable token models
• Acquiring users at lower acquisition costs

Conclusion: Cycle End or Structural Maturation?

Bitcoin’s struggle against a booming stock market and the prospect of further downside do not invalidate its long-term role in the crypto and web3 stack-but they do challenge the simple four-year “number go up” narrative.

As 2024-2025 unfolds, the key questions are:

• Does Bitcoin remain a high-beta macro asset, or evolve into a more resilient digital reserve asset?
• Will AI and tech equities permanently outcompete BTC for institutional flows, or coexist as parallel macro trades?
• Can Bitcoin’s emerging L2 and programmability ecosystem create new sources of demand beyond speculative cycles?

For now, analysts calling for continued weakness see a late-cycle environment defined by distribution, macro uncertainty, and liquidity rotation. Whether this marks the end of a classic halving cycle or the start of a smoother, more mature adoption curve will shape how both investors and builders position in Bitcoin and the broader web3 landscape over the coming years.