The market conditions that accelerated Bitcoin and SPX’s growth following the U.S. election are now shifting.

Bitcoin (BTC) and the S&P 500’s recent movements are showing signs of a new correlation influenced by increasing volatility in U.S. Treasury yields. This shift in market dynamics is making waves, with sentiment quickly turning negative in a 24-hour period.

The main reason behind this change is the emerging head-and-shoulders pattern on both Bitcoin and the S&P 500, which suggests a possible bearish reversal. This pattern coincides with a shift in the market forces that initially drove both assets’ rally following the U.S. election results.

One of the most significant factors is the rising MOVE index, a key volatility measure for the U.S. Treasury bond market. As one of the largest and most influential markets globally, fluctuations in the Treasury bond market can directly impact financial conditions, often leading to risk-off behavior across asset classes.

The MOVE index, which tracks 30-day volatility in Treasury bonds, recently climbed from its December low of 82 to 102.78 on Tuesday. This rise was driven by stronger-than-expected manufacturing data, signaling ongoing economic strength and inflationary pressures. As a result, Treasury yields surged, with the 30-year yield reaching 4.92%, the highest since November, and the 10-year yield rising to 4.68%, the highest since May.

In response to this, Bitcoin saw a 5% drop to $96,900, while the S&P 500 fell by more than 1%. Both assets had experienced a strong upward movement following the election but started losing momentum when the MOVE index began rising in mid-December.

The broader takeaway is that the bond market is now playing a crucial role in shaping the direction of both Bitcoin and the S&P 500. A sustained bullish reversal in these risk assets will likely depend on Treasury markets stabilizing. Given the continued upward trend in the MOVE index, there is a growing likelihood that Bitcoin and the S&P 500 could complete their respective bearish head-and-shoulders patterns.