What Happens to Bitcoin and the S&P 500 if the US Faces a 2025 Recession?

Market Predictions Amid a Potential Recession

Investing.com reports on BCA Research's latest insights in their report titled “Dispatches From The Future (January 2, 2026): The 2025 Recession”. They explore potential market shifts during a hypothetical recession in the US in 2025, predicting significant impacts across global markets.

S&P 500 Forecast

In this recession scenario, the S&P 500 is expected to experience a sharp decline, falling as low as 4197 in November before a slight recovery to 4452 by the end of the year. This represents a staggering 31% drop from its peak, surprising many investors. BCA notes that this decline should not be unexpected, as the S&P was trading at 22.4-times forward earnings in December 2024—33% higher than the average P/E ratio from 2015 to 2019.

Sector Performances

During this period, sectors such as consumer staples, healthcare, and utilities are projected to perform the best, while the initial excitement over AI stocks is expected to fade.

Bitcoin's Performance

Bitcoin, often viewed as a digital hedge against inflation, surprisingly mirrored the volatility of the broader equity market. Instead of being a safe haven, it is predicted to drop to $45,000 by year-end. BCA stated, “Bitcoin’s supporters had hoped that fiscal instability would cause money to flow into the crypto space. It did not. As it turned out, Bitcoin was just a high-beta play on stocks.”

Bond Market Reactions

In the bond market, yields initially rose due to fiscal uncertainty, but eventually fell as the Federal Reserve reduced the benchmark rate to 2%, with the 10-year treasury yield settling at 3.25%. Credit spreads widened significantly in response.

Gold vs. Bitcoin

In contrast, gold ended the year 10% higher, benefiting from lower interest rates and increased demand from emerging market central banks. BCA noted that “Owning gold provided a hedge against many of the surprising developments of 2025.”

Currency Movements

In currency markets, the yen emerged as the top performer, rising to 115 against the dollar, which faced extreme volatility during the recession-driven year.

Overall, the report paints a concerning picture of how a recession could impact both traditional markets and cryptocurrencies, emphasizing the interconnectedness of these financial instruments.