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Bitcoin could face deeper downside as odds of U.S. market meltdown rise to 35%

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Bitcoin is holding up better than it probably should.

The largest cryptocurrency traded at $67,378 on Monday morning, up 1.1% over the past 24 hours and essentially flat on the week, while the world around it deteriorated sharply.

Among majors, ether rose 2.3% to $1,981, hovering just below $2,000. BNB gained 1.4% to $624. Dogecoin added 1.8% to $0.09. Solana climbed 1.8% to $83.69 but remains down 1.5% on the week, still the weakest major over a seven-day basis. XRP was flat at $1.35, down 1% on the week.

S&P 500 futures fell more than 2% in Asian trading. The VIX surged to its highest level since April’s tariff turmoil. Oil is above $100. The dollar just posted its steepest weekly gain in a year.

Meanwhile, veteran strategist Ed Yardeni raised the probability of a U.S. market meltdown to 35%, up from 20%, while slashing the odds of a melt-up to just 5%.

“The US economy and stock market are stuck between Iran and a hard place,” Yardeni wrote. “If the oil shock persists, the Fed’s dual mandate would be stuck between the increasing risk of higher inflation and rising unemployment.”

In meltdown conditions, risk assets across the board tend to suffer as investors pull capital from anything with volatility and move into cash, Treasuries, or the dollar. Bitcoin has historically not been immune to that dynamic, falling alongside equities during every major risk-off episode since 2020 despite its reputation as a hedge.

Elsewhere, NYDIG’s head of research Greg Cipolaro offered a framework for understanding bitcoin’s price action compared to U.S. stocks in a Friday note.

Cipolaro argued that bitcoin’s recent parallel movement with U.S. software stocks reflects “shared exposure to the current macro regime” rather than structural convergence.

Statistically, only about 25% of bitcoin’s price movements are explained by correlation to equities. The other 75% is driven by factors outside traditional stock indices, he said.

The broader equity picture remains grim. MSCI’s global equity gauge fell 3.7% last week, with Asia bearing the worst of it. South Korea has still not fully recovered from its record two-day plunge. Hedge funds have been boosting short positions in U.S. equity ETFs. Benchmark 10-year Treasury yields jumped six basis points as traders priced in higher inflation from the oil shock.

The U.S. has fared better than most on the equity side, with the S&P 500 down only 2% last week, partly because American energy self-sufficiency insulates it more than Asian or European markets.

But the 2% drop in futures on Monday suggests that the buffer is thinning.

Oil rally crushes $37 million in crypto shorts as bitcoin drops

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Crude oil just had its biggest day in history, and the traders shorting or taking bearish bets on it over the weekend paid the price.

Tokenized oil perpetual contracts on Hyperliquid recorded nearly $40 million in liquidations over the past 24 hours, per Coinglass, with $36.9 million of that coming from short positions that got obliterated as crude surged roughly 30% on a dramatic escalation of the Iran conflict.

The CL-USDC contract on Hyperliquid jumped to $114.77, up nearly 20% in 24 hours. The USOIL-USDH pair hit $135, up 9% on the day after already surging earlier in the week.

The oil move dwarfed everything else in commodities. Brent and WTI are trading at levels not seen since Russia’s invasion of Ukraine in 2022, and the single-day percentage gain is on track to be the largest in the history of the oil market.

The catalyst was a weekend that went from bad to catastrophic. Iran appointed Mojtaba Khamenei as new supreme leader, replacing his father who was killed in the opening wave of strikes. Israel launched a fresh round of attacks on Iranian and Hezbollah infrastructure.

Iranian missiles and drones expanded beyond Israel to hit Saudi Arabia and Bahrain, killing two people near Riyadh and targeting energy infrastructure. Iraq’s oil output dropped roughly 60%. Kuwait and the UAE trimmed production as tanker traffic through the Strait of Hormuz collapsed.

Anyone shorting oil into that backdrop got carried out. The $36.9 million in short liquidations on the CL contract alone made oil one of the largest single-asset liquidation events on Hyperliquid outside of bitcoin and ether on Sunday.

Across the broader crypto market, CoinGlass data shows 94,058 traders were liquidated in the past 24 hours with total losses hitting $364.4 million. Bitcoin accounted for $156.67 million of that, ether contributed $70.88 million, and solana added $19.8 million.

Long liquidations outpaced shorts at $215 million versus $149 million, reflecting the broader sell-off in crypto as risk assets dropped on the escalation. The largest single liquidation was a $6.88 million BTC-USD position on Hyperliquid.

Traders are increasingly using crypto perpetual markets to express macro views on oil, metals, and currencies, drawn by 24/7 access, lower margin requirements, and the ability to trade during weekends when traditional commodity markets are closed.

When missiles start flying on a Saturday, Hyperliquid’s oil contract is one of the only places in the world where you can get leveraged crude exposure.

Open interest on the CL-USDC contract sat at $195 million with $570 million in 24-hour volume, numbers that would have been unthinkable for a tokenized commodity product a year ago. The USOIL pair carried $4.1 million in open interest with $16.2 million in volume, smaller but growing.

Bitcoin Trading With Tech Stocks Narrative is Overstated: NYDIG

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Bitcoin’s recent parallel movement with US software stocks is more of a case of shared exposure to macro events, rather than any structural convergence, according to financial services company NYDIG.

In the past week, Bitcoin (BTC) rallied alongside US software stocks, leading many to claim the cryptocurrency was a proxy for the sector, Greg Cipolaro, the head of research at NYDIG, said in a note on Friday.

“While the visual fit of their indexed price is compelling, the conclusion that Bitcoin and software equities have structurally converged, or that they share common exposure to themes such as AI or quantum risk, is overstated,” he said.

Cipolaro added the tandem rally “more plausibly reflects shared exposure to the current macro regime, specifically long-duration, liquidity-sensitive risk assets, rather than evidence of a structural convergence between Bitcoin and software equities.”

Bitcoin’s price is “unexplained by equities”

Bitcoin’s correlation with software stocks has increased on a 90-day rolling basis since its all-time high above $126,000 in early October, but Cipolaro said its correlations with the S&P 500 and Nasdaq have also recently risen, indicating that “the change is not isolated to software stocks.”

However, even with Bitcoin’s correlations to software stocks and the two indices, “the majority of Bitcoin’s price movement remains unexplained by equities,” Cipolaro added.

He said that, statistically measured, only a quarter of Bitcoin’s price movements are explained by a correlation to the stock market, while at least 75% of its movements are affected by drivers outside traditional stock indices.

Bitcoin’s correlation with major indices on a 90-day rolling basis. Source: NYDIG

Cipolaro said it appears Bitcoin is not being priced as a hedge against macroeconomic conditions, which explains “the ongoing frustration around Bitcoin’s failure to ‘act like gold’ despite the digital gold label.”

Related: Bitcoin drops 2% as oil prices surge on energy shortage fears

He added that traders appear to be allocating to assets along a risk curve, rather than buying Bitcoin for a “distinct monetary thesis.”