Bitcoin BTC$68,701.86 began the year on a painful note, even as equity markets remained buoyant. But stock traders’ luck is now running out, as rising bond yields pressure valuations.

Prices for bitcoin plunged to nearly $60,000 from around $90,000 in the first five weeks of the year, according to CoinDesk data. The decline marked a sharp decoupling from the S&P 500 and Nasdaq, which were trading at or near record highs at the time.

Analysts wondered how long the divergence would last — whether bitcoin would quickly bounce back or stocks would eventually catch up with the weakness in bitcoin.

The latter appears to be happening. Since the Iran war began on Feb. 28, fears over inflation and fading Fed rate-cut expectations have pushed U.S. Treasury yields sharply higher, putting pressure on equities.

The stock market’s weakness, appearing weeks after BTC’s decline, underscores the cryptocurrency’s role as a leading indicator for traditional risk assets. Traders in conventional markets often watch BTC to gauge overall risk sentiment, particularly on weekends or during days when traditional exchanges are closed.

Yields rise, stocks drop

The yield on the 10-year U.S. Treasury note rose to 4.41% soon before press time, the highest since Aug. 1. The benchmark borrowing cost has risen by 48 basis points since the onset of the Iran war. The U.S. two-year yield has jumped 57 basis points to 3.94%.

Treasury yields are considered the benchmark for risk-free interest rates and borrowing costs in the economy, such as corporate bonds, mortgages, student loans, etc., are priced relative to Treasuries. So, when yields rise, lenders typically increase rates on loans to maintain their spreads, which pushes borrowing costs higher for businesses and consumers. This leads to risk aversion in equities, which we are beginning to see now.

Futures tied to Wall Street’s tech heavy index Nasdaq fell to 23,890 points early Monday, the lowest since Sept. 11. The S&P 500 e-mini futures fell to 6,505 points, also the lowest since September.

CoinDesk recently highlighted that the price patterns of major stock indices bear a striking resemblance to bitcoin’s price action leading up to its crash. This similarity has raised concerns among analysts, suggesting that stocks could be at risk of further declines if the pattern continues to play out.

“Bitcoin has been at the top of the risk-assets iceberg, and its collapsing price could be early days of a broader drawdown — particularly if surging commodity volatility trickles up to stocks,” Bloomberg’s Senior Commodity Strategist Mike McGlone said in a recent report.

Bitcoin steady

Having crashed early this year, BTC has held largely steady between $65,000 and $75,000 in recent weeks. As of writing, the cryptocurrency changed hands at $68,790.

Yet, pricing in options market shows peak fear, resulting in a record bias for put options, or derivative contracts offering protection from price slides in BTC.