Bitcoin Rally Accelerates As Investors Ignore Recession Risks
Main Receptors:
Bitcoin rises to $72,000 as recession deepens
Soaring oil prices and a dreaded deal with Iran threaten to reverse Bitcoin's recent gains.
Despite data showing rising inflation and weak economic growth in the United States, Bitcoin (BTC) reached the $72,000 level on Thursday. Crude oil prices rebounded to $97 a barrel after senior Iranian leaders said the US and Israel had violated the ceasefire agreement. Traders now fear that risk markets may react negatively, sending Bitcoin prices below $68,000.
The inverse relationship between oil prices and risk markets has become increasingly apparent. The S&P 500 index rose to a 30-day high shortly after US President Donald Trump announced a ceasefire on Wednesday, while WTI crude fell below $100. Therefore, Bitcoin traders fear that the fragile rapprochement between the US and Iran could lead to depression.
A weak ceasefire with Iran and weak US economic data will limit Bitcoin's upside
Iran's parliament speaker and former Islamic Revolutionary Guard Corps (IRGC) general Mohammad Bagher Ghalibaf, who has emerged as a leading voice in the regime, said Israel's continued campaign against Hezbollah in Lebanon, illegal entry of military drones into Iranian airspace and uranium enrichment violates the ceasefire, Yahoo Finance reported.
The U.S. Bureau of Economic Analysis' inflation report on Thursday helped boost traders' spirits. The core personal consumption expenditures (PCE) index rose 0.4 percent in February from the previous month. In parallel, US fourth quarter gross domestic product improved to a 0.5% annualized rate. Overall, the information increases the downside risks.
Despite the upside, the prospect of a major economic slowdown amid tight inflation has led traders to reduce their risk appetite as the US government is forced to inject liquidity to support the market. Declining confidence in the US Federal Reserve to avert recession without causing inflation has weakened the US dollar against a basket of foreign currencies.
The risks of AI infrastructure and personal loans are not an immediate concern
While the correlation between Bitcoin and the US stock market is not perfect, traders seek protection when fixed income declines relative to inflation. Regardless, while Bitcoin is far from being seen as a safe alternative to fiat currency collapse, the weakness of the US dollar favors limited assets.
RELATED: Fed Minutes Crack Door to Further Rate Cuts Amid Iran War
The S&P 500 index was about 2% away from its all-time high on Thursday, a clear sign that investors are not afraid of issues in private credit markets or debt protections for AI infrastructure companies.
Ultimately, Bitcoin appears to have followed investor speculation about the war in Iran rather than reacting to weak US macroeconomic data.
For now, recessionary risks favor smaller assets. So there is little reason to believe that inflation or labor market sentiment can act as a trigger for selling.
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