I don’t often write in detail about bitcoin as a financial asset, mostly because viewing it through that lens makes it seem like an asset that exists within a broken system.
It’s not.
Bitcoin is instead a completely independent system — a new protocol for money.
That said, many of us live in a world that’s mostly priced in fiat, so it’s important to consider bitcoin’s price to some degree because we have bills to pay.
And so the question I’ve been asking myself lately is the question I posed in the title of this newsletter: What happens to bitcoin’s price if the U.S. stock market crashes?
But before addressing that question, it’s first important to address why I think we may see a significant drawdown in markets.
Zooming out about four years, we’ve seen the S&P 500 more than double in this time frame.
That’s an approximately 33% Compound Annual Growth Rate (CAGR) for an asset that historically has a CAGR closer to 10%.
And the CAGR of the QQQ, the index that tracks the NASDAQ, is 37.6%, while its historically been closer to 14%.
These sorts of moves are not normal, and IMO, there will be a significant correction.
Also, it isn’t a good sign that it’s mostly overvalued tech stocks that are carrying the market.
To get an idea of it company is overvalued, you can look at its forward price-to-earnings (P/E) ratio, which is an estimate of what a company is expected to earn compared to its current stock price.
A healthy forward P/E ratio for a tech company is about 25-30.
Palantir’s currently sits at 76, while Shopify’s is at 114, Advanced Micro Devices is at 74.
A healthy forward p/e ratio more mature companies, the type that would be included in the S&P 500, is about 12-14, and, as Bitcoin brokerage River recently pointed out in a great piece entitled “Stocks fail when you need them most” that ratio is currently closer to 22.5, which is higher than it’s been in years.
The following is an explanation from the article of what you’re seeing in the chart:
“The chart […] shows how valuation has historically shaped stock market returns over the following decade. Each dot is a moment in the past, showing how expensive stocks were and what the stock market went on to return over the following ten years.”
The author of the article made a few other excellent points in it, as well:
“If you started investing after 2009, you’ve watched stocks only go up. The S&P 500 has returned about 15% a year since then. Only two years (2018 and 2022) were negative, but both recovered within 16 months.
That’s not normal. It’s the best sustained run in modern history, and it has trained an entire generation to believe that stocks always recover quickly, that every dip is a buying opportunity, and that time in the market fixes everything.”
[Section on chart above]
If history is any indication, stocks this expensive have usually delivered low or negative returns over the following decade. If you do not hold other assets, you risk spending the next decade of your life accumulating no real wealth.
And even if stocks do go up over the next decade, they still have to outperform inflation for you to build real wealth.”
So, this leaves me with two questions: How does bitcoin’s price perform in an environment in which stocks/equities stagnate? and How does bitcoin’s price perform if we see a market crash?
I’m going to respond to the second question from above first.
My short answer is “I don’t know.”
If we see a *major* drawdown in markets, something like the S&P 500 coming down 75%, which I believe could happen, then I can’t imagine bitcoin’s price not drawing down at least 50% in such a scenario.
The other question to consider in this case is What price might Bitcoin be trading at when this drawdown occurs?
Maybe bitcoin’s price heads back to $85k in the coming month or two, and then we see the drawdown. That would bring us to a low of $42.5k. (I know that some of you think I’m insane for proposing these numbers, but many also thought I was insane when I proposed we’d hit $53k in 2026 in a piece entitled “Don’t Buy the Bitcoin Dip” that I wrote for Bitcoin Magazine in January 2025, yet we’ve already hit $58k.)
What is more, one of the biggest bitcoin buyers in the market, Michael Saylor, has announced that he will likely continue selling large chunks of bitcoin to pay for STRC 0.00%↑ dividends, which could also depress bitcoin’s price.
Would you panic sell your bitcoin if we hit a level like $42.5k? If so, maybe consider not buying the dip so heavily right now. (That’s not financial advice, nor is anything I include in this newsletter.)
To answer the first question posed at the end of the section above, I think bitcoin performs quite well in an environment where equities stagnate.
One of the reasons for this is that bitcoin is being adopted more broadly around the world as money and as a tool for savings (it’s sad that I have to differentiate between money and a tool for savings, but this is where we’re at with fiat).
Because of this adoption, bitcoin’s price will rise. I don’t think it’ll rise in a straight line in the near future, but I do think we’ll see it continue to follow something close to the four-year price cycle we’ve seen it follow in the past.
So, with all that said, you’re probably thinking: Just get to the goddamn point, Frank: Is now a good time to buy bitcoin or not?
Good question — and one I can’t answer for you because I’m not a financial advisor and nothing in this newsletter is financial advice.
However, I can share what I’m doing.
I continue to dollar-cost average (DCA) into bitcoin while prices are relatively low.
I’m not trying to perfectly time the bottom, mostly because I don’t know where the bottom will be, nor does anyone.
I’m instead just buying modest amounts of bitcoin semi-regularly at these levels with a plan to hold it and use it over a much broader time horizon.
I’m also keeping a significant cash buffer. I know, I know… How dare I? I write about bitcoin for a living so all my wealth should be in it!
That doesn’t work for me. What works for me is continuing to accumulate bitcoin at a rate that feels comfortable and continuing to educate myself about all of the advancements coming to Bitcoin.
I feel extremely lucky to be living in an era where bitcoin is incredibly cheap to acquire — in the era that precedes it becoming the denominator — but I’ve also learned not to let greed get the best of me because I know that holding a certain amount of fiat is actually comforting to me, because, again, we live in a fiat-denominated world, and ignoring that can be dangerous.
So, let’s recap.
If the stock market comes crashing down, bitcoin’s price likely fall, as well. How much will it crash down to or what levels will it hit at the lows? I don’t know for sure. I’d just say I wouldn’t be surprised to see it in the low $40k area, if not a bit lower.
If seeing it go that low would make you panic sell, then please adjust accordingly.
The people who really feel the benefits of bitcoin are those who hold it over long periods of time, not those trying to speculate on its price or those who are easily shaken out due to it’s volatility.
So, by all means, take advantage of these current low prices, but please do so with an understanding that they may not be the lowest prices we see this cycle.
Best,
Frank
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