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Volatility in cryptocurrencies is handing traders an edge.
Bitcoin remains the most well-known crypto around. Yet it is subject to the same fear and greed that drive the stock market.
In fact, increasing adoption means that Bitcoin is becoming even more sensitive to changing sentiment.
For instance, the Trump administration is pushing ahead with crypto-friendly policies. President Trump even signed an executive order to create a Bitcoin “strategic reserve,” among other things.
Corporate holdings of Bitcoin keep growing as well. Publicly traded companies held 688,000 Bitcoin as of the first quarter. That’s a 16% increase from the prior quarter.
And spot Bitcoin ETFs have made it easy for anyone to hold and trade Bitcoin. These ETFs’ assets top more than $113 billion.
Even better, growing speculation means good opportunities for trading… especially when you use Bitcoin as a signal for stocks.
So today, let’s look at how Bitcoin can tip key turning points in the stock market…
A Leading Indicator
Bitcoin is emerging as a leading indicator for the stock market.
Trading in Bitcoin and other cryptocurrencies can indicate interest in speculative behaviors and the mood of investors.
Fear and greed often show up in Bitcoin before other markets. So Bitcoin can change direction before stocks follow.
The price action in 2025 is a great example.
The price of Bitcoin topped out just under $107,000 on January 21. That was a full month before the S&P 500 peaked on February 19.
And Bitcoin’s chart delivered a warning that a sell-off was in store. Take a look below:
Bitcoin traded near the highs at “1” and “2.” Though Bitcoin’s high kept rising, the Relative Strength Index (RSI) made a lower high. That suggested lagging price momentum.
This signal occurred a full month before the S&P 500 topped out. Bitcoin’s top and negative divergence warned of trouble ahead for stocks.
The relationship goes both ways, too. Bitcoin flagged the rally potential in the S&P 500 back in early April.
So now let’s look at what Bitcoin could be signaling next…
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Trouble Brewing
Back in early March, the S&P 500 sliced through its 200-day moving average (MA) as it sold off.
In contrast, Bitcoin was showing strength. Take another look at the Bitcoin chart:
Bitcoin held above its 200-day MA (upper green line in the chart) in March at “1.” That was the first sign of strength.
Then, as the S&P 500 plunged to new lows in early April, Bitcoin held the $80,000 support level at “2.”
At the same time, a positive divergence was forming with the RSI. It made a higher low (dashed line).
Bitcoin reversed higher from there… as did the eventual rally in the S&P 500 that followed.
But now dark clouds are forming in Bitcoin’s chart. Likewise, the rally in stocks may have gone too far.
Take one more look at the chart:
Bitcoin is coming up to a key resistance zone at the $100,000 level, shown with the shaded area.
At the same time, Bitcoin is stretching above the 50-day MA (blue line). That indicates the potential for a mean-reverting move lower.
The potential for mean reversion will get even stronger if we start to see a negative RSI divergence. That happens when the RSI makes a lower high. You can see that beginning to develop at the arrow.
So since Bitcoin has been a fantastic leading indicator for the stock market in 2025, you should keep paying attention to its moves.
And if the rally in the S&P 500 runs out of steam, don’t say you had no warning.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict