Bitcoin's Stalemate: How U.S. Housing Data Could Influence BTC's Next Steps

In recent times, Bitcoin and other digital assets have shown sluggish price movements, contrasting with a more modest bullish trend in equities. However, this trend may not last. Upcoming U.S. economic activity reports could lead to shifts in capital movement, possibly affecting Bitcoin's price direction in the near future.

Key Takeaways

Recent U.S. housing data could influence Bitcoin's price movements.
Historically, declining Housing Starts signal potential shifts in monetary policy and market conditions, often benefiting equities like the S&P 500.
Bitcoin and the S&P 500 generally move in the same direction, particularly during periods of enhanced liquidity.
A rise in global liquidity through increasing M2 money supply could impact Bitcoin, although asset rotation into riskier assets is crucial.
Currently, Bitcoin remains in a price consolidation phase, likely confined between $85,000 to $90,000 until the market conditions improve.

How Housing Data May Affect Bitcoin

Housing Starts, an important economic indicator that measures new residential construction, along with other relevant macroeconomic data, indicates a potential shift in market conditions. The ongoing decline in Housing Starts suggests that we might see changes in monetary policy expectations and liquidity. Historically, such declines have been linked with improved market conditions for equities, especially for the S&P 500.

Moreover, there’s a noticeable trend: rising Housing Starts often lead to tighter financial conditions. Bitcoin (BTC) has frequently mirrored movements of the S&P 500 during phases where liquidity improves or risk sentiment increases, although this relationship’s strength can differ based on market environments. Currently, the trend in Housing Starts is downwards, which historically has been a positive signal for equities over time.

Housing Start

João Wedson highlights this as a constructive sign for risk assets, though he notes that any significant market reaction might take time. “This is one of those leading indicators that tends to move before the S&P 500 reacts — although it can take months or even years to fully reflect in prices.” This implies that any substantial price increases in Bitcoin might not be seen immediately but could unfold into 2026, contingent on liquidity and economic conditions.

The Correlation Between Equities and Bitcoin

Understanding the long-term relationship between the S&P 500 and Bitcoin sheds light on the relevance of these macro indicators. An analysis of annual returns from 2012 to 2024 reveals that there were only two significant occasions when their performances diverged. In most cases, both assets moved in a similar direction, despite varying levels of volatility.

For instance, in 2014, Bitcoin experienced a decline of about 50%, while the S&P 500 rose by nearly 29%. Similarly, in 2018, Bitcoin fell by 72%, whereas the S&P 500 posted a marginal gain of about 0.15%.

This data reveals a consistent pattern: when both markets decline, Bitcoin usually sees sharper drops than the S&P 500, but when market sentiment improves, Bitcoin has historically shown stronger recovery. For example, this year, Bitcoin is down approximately 32%, while the S&P 500 has increased by around 5.8%. This relationship emphasizes that improved liquidity can eventually support both Bitcoin and altcoins, which have also faced similar downturns recently.

Additional Economic Indicators

The housing data aligns with expectations regarding the ongoing rise in the global M2 money supply. An increase in M2 indicates a growing reserve of capital in major economies, currently approximated at $147 trillion. However, increasing liquidity alone won't guarantee higher asset prices. There must be active capital rotation into riskier assets, supported by enhanced financial conditions and positive risk sentiment.

Economic Indicators

As long as this rotation does not take place, Bitcoin is likely to remain in a consolidation phase, expected to trade within the $85,000 to $90,000 price range. Concurrently, the Financial Stress Index is slightly bearish, remaining in negative territory. Historically, such negative readings correlate with periods when speculative assets, like Bitcoin, typically trade near their lower price limits. Unless macro indicators align — through improved liquidity, reduced financial stress, and renewed risk appetite — Bitcoin is expected to remain range-bound, with price movements confined to its current trading zone.

Final Thoughts

Understanding these economic dynamics is crucial for anticipating Bitcoin’s future price actions. While the current market situation presents challenges, shifts in liquidity and other macro indicators could pave the way for potential upward movements in Bitcoin’s price as we move forward. Keeping an eye on housing data and its impacts on the broader economic landscape will be essential for investors looking to navigate the complexities of the cryptocurrency market.