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Bitcoin recovery diminishes as software and private equity declines pull down stocks and cryptocurrency.
Cryptocurrency has shown a nearly perfect correlation with a significant software sector ETF, which has dropped an additional 5% on Monday, reaching a new 52-week low.
Bitcoin (BTC) price on Feb. 23 (CoinDesk)
Key points:
- Bitcoin dropped back to $65,400 during U.S. trading on Monday after it was unable to sustain a slight overnight recovery.
- U.S. equities experienced a significant decline, with the struggling software sector — recently closely aligned with cryptocurrency — falling by an additional 5% and private equity stocks continuing to decline.
- According to LMAX strategist, Bitcoin is behaving like a “high-beta risk play,” rather than “digital gold,” as investors retreat from speculative assets.
Bitcoin’s slight rebound from its steep overnight decline quickly dissipated during the morning trading session in the U.S. as broader risk markets fell sharply.
Trading at $65,400 around midday on the East Coast, Bitcoin was down 35% over the prior 24 hours.
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This movement occurred as U.S. stocks fell. The S&P 500 and the tech-focused Nasdaq 100 dropped by over 1%, primarily due to renewed weakness in software stocks and private equity companies.
The iShares Expanded Tech-Software ETF (IGV) plunged another 5% to a new 52-week low and has now decreased by nearly 35% since October, amid concerns that generative AI tools could disrupt traditional software business models. Regardless of the veracity of this concern, the prevailing market sentiment is that cryptocurrency is simply software, and the price trends of Bitcoin and IGV have recently shown nearly perfect correlation.
Adding to this bearish sentiment are ongoing fears that AI might be steering markets towards a significant negative credit event akin to the global financial crisis of 2008. This is currently reflected in the prices of private equity shares, which have substantial exposure to the aforementioned software sector. Blow Owl Capital (OWL) — which last week divested assets to appease liquidity-seeking investors — saw its shares decline by another 3.5% on Monday, totaling a 32% drop year-to-date. BlackStone (BX), Ares Management (ARES), and Apollo Global Management (APO) have all compounded their considerable recent losses, falling between 6% and 8%.
Cryptocurrency often acts as a high-beta proxy for technology and general liquidity conditions, and Monday’s downturn illustrated this relationship. Although Bitcoin has maintained levels above its early February lows, it continues to trade within a narrow range between $60,000 and $70,000 as risk appetite remains delicate.
Furthermore, there is uncertainty surrounding global tariffs following the Supreme Court’s restriction on President Trump’s prior broad use of tariffs, noted Joel Kruger, market strategist at LMAX Group.
“This created a classic risk-off atmosphere,” Kruger remarked. “Investors have retreated from speculative assets like cryptocurrency, with Bitcoin functioning more as a high-beta risk play than ‘digital gold.’
