The most dramatic spike in the Financial Stress Index occurred during the March 2020 COVID-19 market panic, when it briefly exceeded levels seen during the 2008 financial crisis. Bitcoin crashed substantially during this acute stress period but recovered much faster than traditional markets once the Fed intervened with unprecedented stimulus. Earlier stress episodes like the 2018 Q4 market correction also saw Bitcoin decline alongside rising financial stress. The 2023 regional banking crisis (Silicon Valley Bank failure) caused a smaller stress spike, during which Bitcoin actually rallied, potentially indicating an evolution in its market perception toward being a beneficiary of banking system stress.

The positive correlation between gold and inverse real yields is clearly visible throughout most periods. When the inverse real yield line is above zero (meaning actual real yields are negative), gold tends to perform well as there is no real return from holding bonds after accounting for inflation. Conversely, when the inverse real yield line is below zero (meaning actual real yields are positive), gold faces headwinds. The dramatic spike in inverse real yields during 2020-2021 (when actual real yields plunged deeply negative) coincided perfectly with gold reaching near-record highs above $2,000/oz.

Major market events are clearly visible on this chart. During the COVID-19 crash in March 2020, both assets briefly showed negative YoY returns, but Bitcoin rebounded much more dramatically while the S&P 500 returned to modest positive territory. The 2022 bear market saw both assets decline in tandem, highlighting increased correlation during stress periods. Bitcoin's YoY performance has consistently shown much higher highs (during 2017 and 2021 bull runs) and lower lows (in bear markets) compared to the S&P 500's more modest fluctuations.