Bitcoin retakes $85,000 as stocks and crypto unexpectedly rally

Bitcoin has roared back to $85,000, clawing its way out of a brutal stretch that saw the OG crypto drop by 14% since this year started and sink by 23% below its January all-time high, according to data from CoinGecko.

The rebound comes as stocks and crypto markets surge together, defying expectations after weeks of chaos fueled by President Donald Trump’s tariff threats.

For most of the week, Bitcoin hovered near $80,000, holding steady even as global markets took a hit. Some investors saw this as a potential buying opportunity, while others feared more pain ahead.

Now, with a sudden move back toward $90,000 territory, all eyes are on whether this rally has legs or if it’s just a temporary relief bounce.

Bitcoin follows the dollar and liquidity trends

Bitcoin’s price has long moved in opposite directions to the U.S. dollar index (DXY).

Analysts tracking the crypto market say that Bitcoin follows the DXY on a 10-week lag, meaning that when the dollar peaked on January 13, Bitcoin was still absorbing the impact of a strong dollar environment from late 2024.

But the dollar has been weakening since mid-January, and Bitcoin is now reflecting that shift.

Christopher Harvey, an equity analyst at Wells Fargo, explained the pattern in a note this week. “Bitcoin has consistently tracked the inverted DXY on a ~10-week lag,” Harvey wrote.

“The relationship suggests the current drawdown is a reaction to the strong dollar in Q4, and that the weak dollar we have seen since January may be more constructive for the asset going forward.”

Another major factor at play is global money supply (M2). Analysts say Bitcoin’s price follows M2 liquidity trends with a three-month delay.

According to Ed Engel at Compass Point, “Global M2 peaked in late September, contracted in Q4, and bottomed in early 2025. Since then, global liquidity has rebounded alongside recent USD weakness.”

Engel believes that if Bitcoin continues tracking M2 growth, the cryptocurrency could see further weakness in March, but a much stronger rally in the second quarter of 2025. “If Bitcoin maintains its correlation with M2, this implies a significant rally in Q2,” Engel wrote.

Crypto industry gains political support, but markets remain cautious

Despite the U.S. crypto industry operating under a Congress that is more favorable than ever, the market has struggled for weeks.

The Trump administration has repeatedly promised to make the U.S. a better place for crypto businesses, but clear regulatory guidelines are still missing.

Meanwhile, Wall Street analysts are divided on Bitcoin’s outlook. Wolfe Research, which tracks technical indicators closely, isn’t convinced that a major rally is coming yet.

“We are seeing notable breakdowns across the board through key support levels,” the firm wrote in a report this week. “This is not the action of a group readying to rally. Instead, we fear it speaks towards a shift into a period of sustained weakness.”

Still, Wolfe Research noted that Bitcoin crossing $91,000-$92,000 could provide short-term relief. However, they warned that any move toward $90,000 will likely face selling pressure, making it harder for Bitcoin to break through that level.

Stock market surges as government shutdown fears fade

Bitcoin isn’t the only thing bouncing back. The U.S. stock market also surged on Friday, with the S&P 500 jumping 1.7%, the Nasdaq gaining 2%, and the Dow Jones Industrial Average rising 1.4%. The rebound came after a brutal week that saw stocks slide as Trump’s shifting tariff policies rattled investors.

The S&P 500 and Nasdaq Composite are both down over 2% for the week, marking one of the fastest corrections in market history. According to Ritholtz Wealth Management, it took less than a month for the S&P 500 to enter correction territory, making it the fifth-fastest drop in the last 75 years.

But some relief came after Senate Democratic leader Chuck Schumer pulled back on his threat to block a funding bill, easing fears of a government shutdown. At the same time, gold broke past $3,000 per ounce as investors looked for safe-haven assets amid ongoing economic uncertainty.

Trump isn’t backing down on trade wars, either. On Thursday, he stated that he doesn’t plan to “bend at all” on tariffs, setting up further tensions with America’s biggest trading partners.

The Federal Reserve is also in focus. Inflation data this week showed some improvement, but it wasn’t enough to fully calm investor concerns.

The University of Michigan’s latest consumer sentiment survey came in at 57.9, well below the expected 63, signaling that Americans remain uneasy about the economy.

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