Recent declines in the price of Bitcoin could merely be the beginning of a more dramatic fall, a crypto research firm has predicted, attributing this potential downturn to a looming economic storm and a decoupling of the cryptocurrency from the broader stock market.

The analysis, authored by Markus Thielen of 10x Research, noted that there were some recent positive signs when it came to the resilience of the crypto market, from institutional interest in spot Bitcoin ETFs to the price of BTC withstanding the return of billions in Bitcoin by Mt. Gox.

The trend line near $70,000 was tested for the sixth time–however, the situation soon took a turn,” the firm wrote. “In the past 48 hours, it has become apparent that the U.S. economy is weaker than the Federal Reserve initially believed.”

The findings hinge on the growing divergence between the robust performance of the stock market—particularly fueled by AI hype—and the weakening underlying economy as signaled by the ISM Manufacturing Index, a key metric measured by the Institute for Supply Management. 10x Research said “a weak ISM index sent shockwaves through risk assets.”

“Historically, Bitcoin has experienced sharp corrections when the ISM peaked,” the report states. “What makes this situation particularly perilous is the lingering effect of the COVID stimulus and aggressive government support, which may have artificially inflated the stock market.”

While the Federal Reserve has adopted a dovish tone, suggesting potential rate cuts in the fall, the research warns that this might be too little too late to prevent an economic downturn.

The firm’s prediction is further underpinned by the rising probability of a recession in 2025, a trend historically associated with stock market declines. If this scenario unfolds, it notes, Bitcoin could suffer a significant selloff—echoing the conditions that preceded the 2001 and 2007 recessions.

“Suppose the stock market follows the downward trend of the ISM Manufacturing Index or even starts to anticipate a near-recession,” the report said. “In that case, stocks will likely decline significantly over the next few quarters.

“This would have substantial negative implications for Bitcoin as well,” it continued. “If this scenario unfolds, Bitcoin prices could revisit the $50,000 level and fall even lower.”

The report’s grim outlook is compounded by the recent surge in Bitcoin mining difficulty.

Galaxy Digital’s Head of Research Alex Thorn said Bitcoin mining difficulty reached an all-time high after a 10.5% adjustment, which was also the largest difficulty increase ever.

“In [percentage] terms, this was the 24th biggest increase since 2016, the 73rd biggest since 2012, the 119th of all time,” he tweeted.

This unprecedented surge in mining difficulty reflects the growing competition among miners and the increasing computational power being devoted to securing the Bitcoin network.

While it underscores the robustness of the Bitcoin ecosystem, it also introduces new dynamics to the market. Increased mining difficulty can put pressure on miners’ profitability, potentially influencing their decisions to hold or sell Bitcoin—which could, in turn, affect market prices.

Edited by Ryan Ozawa