Key takeaways:
Analysts downgraded US stocks due to high valuations, a weak dollar, and policy risks despite AI-driven earnings growth.
Limited S&P 500 upside may shift capital toward Bitcoin, especially if major sovereign funds announce BTC reserves.
Bitcoin (BTC) price plunged below $65,500 on Friday, effectively erasing gains established on Wednesday. This correction closely tracked intraday S&P 500 movements after wholesale inflation data in the US triggered increased risk aversion. A report from the UBS investment bank downgrading US stocks to neutral likely accelerated the surge in demand for the safety of fixed-income assets.
S&P 500 futures (left) vs. Bitcoin/USD (right). Source: TradingView
Investors fear that a potential doomsday scenario for the US equity market could drive Bitcoin to new yearly lows. While increased spending on artificial intelligence infrastructure remains a primary concern for some, Bitcoin’s long-term trajectory is unlikely to remain dependent on the technology sector.
Institutional Bitcoin adoption could improve market sentiment
According to the UBS global equity strategy team, valuations within the US equity market are no longer attractive compared to other global regions. Analysts cited mounting risks from a weakening dollar and US policy turbulence, which are creating asymmetric structural downside risks. Furthermore, corporate buybacks appear to be losing their effectiveness in sustaining price levels.
The relevance of the $70 trillion US market capitalization should not be overstated, even as it disturbs price trends on supposedly uncorrelated assets like Bitcoin. Still, the UBS report is far from a doomsday prediction, especially considering their year-end S&P 500 target remains at 7,500.
Part of the recent decline to $65,500 is explained by Friday’s US Producer Price Index jumping 0.5% in January 2026 from the previous month. When inflation metrics surprise to the upside, traders often become less certain regarding interest rate cuts from the US Federal Reserve. A restrictive monetary policy negatively impacts the economy as credit remains expensive and companies have…
..
