Bitcoin [BTC] may have already factored in tighter monetary policy, leaving stocks more vulnerable to recent macroeconomic shocks. Energy prices, tied to inflation, caused markets to shift from expecting rate cuts to near certainty of no cuts this year. Bitcoin, sensitive to liquidity changes, has corrected below $70,000, down 23.7% year-to-date. Equities, starting from higher valuations, are now repricing with the S&P 500 down nearly 8% over the past month.
Assets experiencing valuation compression, like bitcoin, generally show reduced downside risk as speculative positioning unwinds. In contrast, markets near cyclical highs are more sensitive to negative macroeconomic events.