Fund managers dump US stocks at record pace — Can recession fears hurt Bitcoin?

Bitcoin’s (BTC) price action has closely mirrored that of the US equity market in recent years, particularly the tech-heavy Nasdaq and the benchmark S&P 500.

Now, as fund managers stage a historic exodus from US stocks, the question arises: could Bitcoin be the next casualty?

Investors slashed their exposure to US equities by the most on record by 40-percentage-points between February and March, according to Bank of America’s latest survey.

This is the sharpest monthly decline since the bank began tracking the data in 1994. The shift, dubbed a “bull crash,” reflects dwindling faith in US economic outperformance and rising fears of a global downturn.

With a net 69% of surveyed managers declaring the peak of “US exceptionalism,” the data signals a seismic pivot that could ripple into risk assets like Bitcoin, especially given their persistent 52-week positive correlation over the years.

Bitcoin and S&P 500 index 52-week correlation coefficient chart. Source: TradingView

More downside risks for Bitcoin and, in turn, the broader crypto market arise from investors’ rising cash allocations.

BofA’s March survey finds that cash levels, a classic flight-to-safety signal, jumped to 4.1% from February’s 3.5%, the lowest since 2010.

BofA Global Fund Manager March survey results. Source: BofA Research

Adding to the unease, 55% of managers flagged “Trade war triggers global recession” as the top tail risk, up from 39% in February, while 19% worried about inflation forcing Fed rate hikes—both scenarios that could chill enthusiasm for risky assets like Bitcoin.

Conversely, the survey’s most crowded trades list still includes “Long crypto” at 9%, coinciding with the establishment of the Strategic Bitcoin Reserve in the US.

Meanwhile, 68% of managers expect Fed rate cuts in 2025, up from 51% last month.

Related: ‘We are worried about a recession,’ but there’s a silver lining — Cathie Wood

Lower rates have previously coincided with Bitcoin and the broader crypto market gains, something bettors on Polymarket believe is 100% certain to happen before May.

Bitcoin’s price has declined by over 25% two months after establishing a record high of under $110,000 — a dropdown many consider a bull market correction, suggesting that the cryptocurrency may recover in the coming months.

“Historically, Bitcoin experiences these types of corrections during long-term rallies, and there’s no reason to believe this time is different,” Derive founder Nick Forster told Cointelegraph, adding however that the cryptocurrency’s next six months depend on how traditional markets (stocks) perform.

Technically, as of March 19, Bitcoin was holding above its 50-week exponential moving average (50-week EMA; the red wave) at $77,250.

BTC/USD weekly price chart. Source: TradingView

Historically, BTC price returns to the 50-week EMA after undergoing strong rallies. The cryptocurrency’s decisive break below the wave support has signaled a bear market in the past, namely the 2018 and 2022 correction cycles.

Source: Milkybull Crypto

A clear breakdown below the wave support could have BTC’s bears eye the 200-week EMA (the blue wave) below $50,000, echoing the downside sentiment discussed in the BofA survey.

Conversely, holding above the 50-week EMA has led prices to new sessional highs, akin to what the market witnessed in 2024. If Bitcoin recovers from the said wave support, its likelihood of testing the $100,000 psychological resistance level is high.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.