Stifel Warns Bitcoin Could Plunge to $38K, Threatening Tech Stocks

The Stifel analysis is grounded in Bitcoin’s volatile history. The firm’s analysts cited previous catastrophic drawdowns from all-time highs: 93% in 2011, 84% in 2014, 83% in 2018, and 76% in 2022. With Bitcoin already tumbling from its October peak of $126,000, they project a potential 70% drawdown this cycle, which would bring the price to approximately $38,000. While they acknowledge this as a worst-case scenario, the ascending nature of previous bear-market lows provides a sobering template for the current sell-off.

This historical perspective suggests the recent price action may be more than a typical correction. “History suggests the rout could deepen before momentum shifts,” the analysts noted, indicating that the bottom may not yet be in. The prediction underscores the extreme volatility inherent in the crypto asset class, where multi-year gains can be erased in months during periods of macroeconomic stress.

Central to Stifel’s bearish thesis is the shifting stance of the U.S. Federal Reserve. The analysts directly linked Bitcoin’s latest downturn to the “hawkish nature of December’s cut,” referring to the central bank’s signal of a more data-dependent approach to future interest rate decisions. The Fed’s subsequent decision to hold rates steady earlier this month reinforced this cautious, inflation-focused posture.

The analysts posited that a clear signal from voting members of the Federal Open Market Committee (FOMC) against enabling an “inflationary boom”—particularly amid an economic outlook clouded by tariffs—could ultimately mark the bottom for Bitcoin. They compared the potential scenario to Fed Chair Jerome Powell’s stark 2022 warning in Jackson Hole that “there will be pain” as policymakers fought inflation. The sell-off accelerated further on Friday after former President Donald Trump nominated Kevin Warsh, a known inflation hawk, as a potential successor to Powell, intensifying market fears of prolonged restrictive monetary policy.

Perhaps the most significant shift identified by Stifel is Bitcoin’s changing relationship with broader financial markets. The analysts observed a structural shift: Bitcoin has not benefited from a weaker U.S. dollar over the past year, nor has it rallied alongside increases in global dollar-denominated liquidity as it did in previous cycles. They attributed this breakdown to factors including Trump’s trade war and shifting inflation expectations driven by economic growth.

“When combined, that creates the perception that Bitcoin is no longer a hedge against fiat money,” the analysts assessed. This failure of its core investment narrative for many institutions has removed a key support. Furthermore, Bitcoin’s high correlation with technology stocks has turned from a tailwind to a headwind. The analysts noted that the prospect of higher inflation and signs of credit stress from massive AI investments are weighing on tech equities, thereby dragging down Bitcoin.

Most alarmingly, Stifel highlighted an “ominous” and widening gap between Bitcoin and the Nasdaq 100 Index (NDX) since October. With Bitcoin falling sharply while tech stocks waver near all-time highs, this divergence suggests Bitcoin may be leading the broader market lower. “The outlook could also be foreboding for tech equities,” the analysts wrote, implying that Bitcoin’s current slump may be a leading indicator of impending weakness in the high-flying tech sector.