Bitcoin had a very turbulent year. The biggest cryptocurrency by market capitalisation has entered the possibility of ending 2025 with its first-ever annual loss since 2022 after several highs and steep downfalls.

The calendar year was marked by drastic price movements which could be attributed to political events, market uncertainty as well as advancing attitudes towards interest rates. Even though, Bitcoin used to hit an all-time high of above 126,000, it is now standing at around 89,000 and is unstable.  

Stock Market Relationship Strengthens

The most common theme of the year has been the further improved correlation of Bitcoin with the equity market. Traditionally, crypto-assets did not develop in a very responsive way, but the current trends show that they are becoming more sensitive to the same macro-financial factors that affect stock indices.

Empirical evidence also shows that the Bitcoin correlation coefficient with the S&P 500 rose to 0.5 in 2025, an improvement on its correlation with the Nasdaq 100, which is technology-intensive and similar.  

The latter is accompanied by the reclassification of Bitcoin by retail and institutional investors who understand the asset as an additional element of the risk-equity portfolio.

As a result, Bitcoin is more responsive to issues affecting stock markets, specifically, fears of high valuation among AI companies. Bitcoin often follows AI-related equities when they are on a decline.  

Major crashes are triggered by political Shocks

A good portion of the volatility of Bitcoin has been caused by political events. After President Donald Trump was elected, the prices of crypto shot up, but the introduction of new tariffs in April triggered a concurrent falling in the cryptocurrency and equity market. Bitcoin later recovered and reached an all-time high in early October but the biggest uproar was on 10 October.

The market strongly reacted to a subsequent tariff announcement and threats of new export restrictions by billing more than half of the crypto leveraged positions in a single day, the biggest liquidation in the history of the cryptocurrency. Bitcoin has not entirely bounced back since this spillage and it is the next month that saw the largest decline in three years.  

Forecasts Turn Cautious  

At the beginning of the year, many crypto followers forecasted huge profits. A company headed by Michael Saylor called Strategy predicted the achievement of Bitcoin at $150,000, and some banking institutions predicted that Bitcoin would achieve $200,000 by the end of the year.

Such optimistic forecasts were dashed during the crash in October. At the moment, the market participants state a rational chance of Bitcoin ending the year under 80000, which was 20% a few weeks ago, and is now at 15%.

The chief executive at strategy has just warned of a possible Bitcoin winter, although Standard Chartered is more subdued.  

Interest Rates Get You More Pressure

The exposure of Bitcoin to the expectations in relation to the U.S. Federal Reserve policy has worsened. Increased rates announced by the Fed lead to a decline in crypto assets; vice versa, the announcement of a decrease in rates will most likely trigger an increase.

The recent macroeconomic information has led traders to expect a rate cut in the near term which offers some relief and alleviates volatility. According to the analysts, the future course of Bitcoin will be determined by the future decision of the Fed, along with AI equities trends.

Positive risk climate can stabilize the market and new waves of fear can re-introduce the selling pressure.  

Outlook  

With the year 2025 nearing its final stage, Bitcoin is in a dangerous position. Although it has proved to be resilient, there is still room in it to be affected by political shocks, movements in the equity market and interest-rate developments.

The cryptocurrency industry can be classified as either being reinstating confidence to the market or as crashing at the end of the year.