Traders May Turn to Bitcoin if UBS Bearish US View Pans Out

Bitcoin capital rotation could accelerate if UBS's bearish assessment of the US equity market proves correct, according to analysis published on Friday. The Swiss investment bank downgraded American stocks to neutral, warning that valuations have ballooned to 35% above global peers — far exceeding the 4% average premium recorded since 2010. Meanwhile, Bitcoin slid below $65,500 as hot wholesale inflation data and falling Treasury yields amplified risk-off positioning across digital assets.

UBS Downgrades US Stocks Amid Valuation Concerns

UBS's global equity strategy team concluded that American stock valuations are no longer compelling relative to other regions, according to a report covered by CNBC. The analysts highlighted a weakening US dollar, escalating policy turbulence, and fading effectiveness of corporate buybacks as structural headwinds generating asymmetric downside risk for domestic equities. Notably, the bank identified proposed measures to cap credit card interest rates, impose additional import tariffs, and restrict private equity investment in housing as fresh sources of volatility that could weigh on investor confidence.

Despite the downgrade, UBS maintained its year-end S&P 500 target at 7,500, suggesting the outlook is cautious rather than catastrophic. The bank acknowledged that artificial intelligence adoption across key US industries could help sustain earnings growth over the coming quarters. Still, the $70 trillion US equity market capitalization carries outsized influence on supposedly uncorrelated assets like Bitcoin, meaning a prolonged stagnation in stocks could ripple through crypto markets before ultimately driving capital elsewhere.

Why Did Bitcoin Drop Below $65,500?

Friday's decline stemmed directly from hotter-than-expected inflation figures. The US Producer Price Index jumped 0.5% in January 2026 compared to the prior month, catching traders off guard and undermining confidence in near-term Federal Reserve interest rate cuts. A restrictive monetary stance weighs on growth-oriented assets because elevated borrowing costs discourage corporate expansion and reduce liquidity flowing into speculative markets.

The sell-off in Bitcoin closely tracked intraday S&P 500 weakness, reinforcing the persistent correlation between risk assets. Adding to the bearish mood, the US 10-year Treasury yield fell to 3.97% from 4.21% just three weeks earlier. This unusual decline in government bond yields, occurring alongside equity softness, signals that institutional investors are aggressively seeking shelter in fixed-income instruments regardless of inflationary pressures. Such positioning typically precedes extended periods of risk aversion across both equities and crypto.

Could Bitcoin Benefit From Capital Rotation?

Bitcoin stands as a viable beneficiary if equity upside proves limited, though the timeline remains uncertain. Gold has already surged to a $36.5 trillion market capitalization, establishing itself as the dominant store-of-value asset. By comparison, even a 52% Bitcoin rally to $100,000 would bring its total market cap to just $2 trillion — a fraction of gold's valuation and the combined $24.2 trillion held by the ten largest technology companies.

This scale disparity suggests that even modest capital rotation away from overvalued equities or technology stocks could produce outsized gains for Bitcoin. However, until the S&P 500 decisively underperforms or fixed-income and real estate markets absorb the bulk of reallocated funds, the cryptocurrency may struggle to decouple from broader risk sentiment. The correlation between Bitcoin and traditional markets has remained stubbornly high throughout 2026, limiting the digital asset's ability to rally independently.

US stocks are trading 35% above global peers, versus an average premium of 4% since 2010.

— UBS Global Equity Strategy Team

Strategic BTC Reserves and ETF Inflows Signal Demand

Spot Bitcoin ETFs attracted $1 billion in inflows over just three days as investors bought the dip, according to recent market data. This sustained institutional appetite suggests that large allocators view current price levels as attractive entry points, even amid macro headwinds. ETF flows have emerged as one of the most reliable demand indicators for Bitcoin since the landmark approvals, providing a transparent gauge of institutional conviction.

Sentiment could shift decisively in Bitcoin's favor if major corporations or sovereign wealth funds announce strategic BTC reserves, whether held directly or through ETF exposure. History provides a clear precedent: when Tesla disclosed a significant Bitcoin position, trader risk perception transformed almost overnight. While no such announcement is imminent as of February 2026, the combination of capped equity returns and growing institutional infrastructure makes a catalyst of this nature increasingly plausible.

Until that inflection point arrives, however, the probability of a sustained on-chain decoupling from US stock market trends remains low. Traders watching for the next Bitcoin breakout should closely monitor UBS's equity outlook alongside Federal Reserve policy signals and upcoming macroeconomic releases, as these factors will ultimately shape whether meaningful capital rotation into alternative stores of value materializes in the months ahead.