Bitcoin’s post-FOMC hikes, however, may continue to buy bulls.

Main Receptors:

Spot market demand through US-listed ETFs and strategy buying BTC supports the bullish momentum of Bitcoin.

Low leverage among Bitcoin bulls reduces the risk of adding liquidity even if the price drops another 5%.

Rising inflation negatively impacts fixed income returns, eventually paving the way for a shift away from gold to Bitcoin.

Bitcoin (BTC) faced a 7% correction after flirting with the $76,000 level on Tuesday. U.S. stock markets fell after Israel attacked Iran's largest gas processing plant and the U.S. producer price index rose more than expected, fueling higher oil prices.

Despite the recent losses, there is no sign that Bitcoin's bullish momentum is fading as macroeconomic conditions worsen for the S&P 500 and US Treasuries. In addition, Bitcoin bulls reduce the risks of liquidation by avoiding excessive leverage.

The S&P 500 index traded 4 percent below its all-time high on Wednesday, despite continued pressure from recent weak U.S. labor market data and the ongoing war in Iran. The U.S. reported a steady 1.85 million jobless claims at the end of March 7. On Wednesday, U.S. wholesale prices rose 3.4% in February and from a year earlier, the biggest gain in 12 months.

As oil prices rose above $98, investors became more confident that the US Federal Reserve would not ease monetary policy until 2026. The CME FedWatch Tool showed that the odds of a rate hike in September fell to 42% in September, from 89% a month earlier, based on implied odds in futures markets.

Bitcoin has come under pressure as concerns of a long-term war increase investor concern

Sticky inflation and the prospect of a protracted war have dampened the prospect of expansionary economic stimulus, keeping investors from averting risk. However, there is no reason for traders to assume a risk anytime soon, at least given how interest rates will trade against inflation expectations.

The 2-year Treasury yield traded at 3.71% on Wednesday, while the Cleveland Fed's 2-year inflation rate stood at 2.27%, resulting in an adjusted return of 1.44%. During periods of high panic, high demand for government bonds results in near-zero or negative returns. Conversely, a lack of confidence in US monetary policy could push the index to 2.5% or more.

Even if Bitcoin falls another 5% in the coming weeks, there's no sign of overconsumption from bulls, meaning there's little chance of liquidation. Recent bullish activity has been supported by the spot market, particularly strong buying activity in the US-listed spot Bitcoin ETF Stock & Strategy (MSTR).

CoinGlass estimates that $450 million worth of leveraged long Bitcoin futures will force a termination to $68,000, representing less than 1% of the current total open interest of $49 billion. As interest in short positions increases, the funding volume of Bitcoin Perpetual Futures proves that bears are overconfident.

Related: 74% of Institutions Expect Crypto Value to Increase in 12 Months – Survey

Negative funding means shorts are paying to keep their positions open. More importantly, the indicator stopped in the range of 6% to 12% when the price of Bitcoin rose above $76,000.

Gold prices fell to $4,900 on Wednesday, showing signs of weakness after hovering above $4,800 for four weeks. An eventual ride away from gold could be the trigger for Bitcoin's continued rally, especially since inflation has a negative impact on expected returns for fixed-income assets. Overall, there is little sign that Bitcoin's current bullish activity has faded.