WASHINGTON, D.C.: After a year marked by dramatic surges and equally steep drops, bitcoin is limping toward the end of 2025 with the possibility of posting its first annual decline since 2022, a sharp reversal for an asset that set multiple records just months ago.

Global equity markets have also swung wildly this year, repeatedly breaking records before retreating on concerns over tariffs, interest rates, and a potential bubble in AI-related stocks. While major indexes remain up for the year, bitcoin's tightening link to equities has become unmistakable, strengthening in 2025 as both retail traders and institutions expanded their exposure to cryptocurrencies.

Analysts say those deeper ties mean bitcoin is increasingly reacting to the same forces moving stocks, from shifts in monetary policy to nervousness over sky-high tech valuations. "Crypto reacting to broader equities has been a consistent theme in 2025," said Jasper De Maere, desk strategist at crypto algorithmic trading firm Wintermute.

Bitcoin traded around US$89,000 on December 8, far below the all-time high of more than $126,000 reached in early October.

The token's climb earlier this year accelerated after the election of crypto-friendly U.S. President Donald Trump, only to be knocked sharply lower in April when markets sold off following his tariff announcements. Prices recovered, but another crash hit on Oct. 10 when Trump unveiled a fresh tariff on Chinese imports and threatened new export controls on critical software. That triggered more than $19 billion in liquidations across leveraged crypto positions, the largest such wipeout in crypto history.

Since then, Bitcoin has failed to regain momentum. November marked its most significant monthly decline since mid-2021. Options platform Derive.xyz says bearish sentiment has eased slightly, with traders assigning a 15 percent probability that bitcoin ends the year below $80,000, down from 20 percent weeks earlier.

The downturn has dealt a blow to crypto champions. Michael Saylor's Strategy, the largest corporate holder of bitcoin, had projected the price would hit $150,000 this year. Analysts at Standard Chartered forecast $200,000 by the end of 2025. In recent weeks, Saylor said his firm could withstand a 95 percent bitcoin drawdown, while Strategy CEO Phong Le warned of a potential "bitcoin winter."

Two major market shocks in 2025, April and October, highlighted bitcoin's growing correlation with equities, particularly AI stocks. Historically viewed as distinct from traditional markets, bitcoin now appears increasingly tied to broader risk sentiment. LSEG data shows bitcoin's average correlation with the S&P 500 rose to 0.5 this year, up from 0.29 in 2024. With the tech-heavy Nasdaq 100, the correlation jumped to 0.52 from 0.23.

Crypto has become more sensitive not only to tech valuations but also to expectations for Federal Reserve policy. While past Fed rate cuts do not consistently boost bitcoin, analysts say dovish signals often fuel rallies. Hawkish communications beginning in October weighed on crypto before easing inflation data shifted expectations: markets now price an 86 percent chance of a 25-basis-point Fed cut this week.

"The Fed's support of monetary supply in this particular scenario is going to be an indicator that crypto is all looking at," said Mo Shaikh, co-founder and general partner at Maximum Frequency Ventures.