Bitcoin’s price weakness stems from major macroeconomic concerns

Bitcoin (BTC) prices traded below $39,000 for more than 50 days on January 23. The downward movement began on January 11, coinciding with the US Securities and Exchange Commission's (SEC) approval of the spot Bitcoin ETF. The 17.5% correction in the 12 days to January 23 triggered a total outflow of $385 million in long-term (buy) BTC futures contracts.

The US economy is now supporting the stock market in terms of Bitcoin

From a macroeconomic perspective, 2024 saw a shift in the DXY index, which measures the strength of the US dollar against a basket of foreign currencies including the euro, the British pound and the Japanese yen. After trading at 100.80 on December 28, 2023—the lowest level in more than 5 months—the US dollar has recovered, and the index is currently hovering around 103.75. This move has investors believing that the odds still support the U.S. currency despite fiscal woes — at least relatively speaking.

Analysts and economists are now crediting inflation to the US Federal Reserve's (Fed) successful strategy to curb inflation without causing economic chaos. US 1-year interest rates fell to 2.43% in January 2024, down from 3.09% in December 2023. US gross domestic product grew 2.4 percent in the first quarter, then 2.4 percent in the second quarter.

According to the FedWatch Tool from CME Group, the probability of an interest rate cut in March fell to 47% from 81% last week. In addition, investors now expect only 5 rate cuts through 2024, as opposed to the previous estimate of 6. New York Fed President John Williams and Atlanta Fed President Rafael Bostick said they are in no rush to cut interest rates, even though they are absent. More walks in conversation, as reported by CNBC.

One could argue that the S&P 500 index is currently near its peak; Therefore, external factors that pose a risk to assets should be beneficial to Bitcoin. However, the drivers of the stock market are completely different from commodities, including cryptocurrencies. For starters, the 500 largest U.S. companies hoard $2.6 trillion in cash, some of which pays dividends, so the sector serves as a safe haven in the event of a mild economic downturn.

The price of Bitcoin reflects the flow of ETFs and high regulatory pressure

In addition to being seen as risk-averse, bitcoin has had its own problems, including a net outflow of exchange-traded funds (ETFs) since January 17.

1st update for 1/22 #Bitcoin ETF Holdings$GBTC has not reported yet. The purple highlight shows that this is my guess based on the reported flows of $IBIT$FBTC$ARKB$BITB$BRRR $BTCO $HODL $EZBC $BTCW $DEFI $GBTC pic.twitter.com/JyBiSJq5LR

— CC15Capital (@Capital15C) January 23, 2024

According to a post by user Capital15C on the X social network, the total number of Bitcoins held by US-listed ETFs fell to 645,054 on January 22. The flow of 183 million dollars in 3 working days seems absolutely small, but it is against the investors. Expectations after spot ETF launch.

Related: Spot Bitcoin ETFs Discovered by Arkham On-Chain Addresses

Another source of concern for Bitcoin investors comes from the now discontinued Mt. Gox exchange appears to be a bankruptcy estate, which is expected to open some 142,000 BTC. Some of the first payments occurred in December 2023, but the trustee is expected to pay creditors by October 2024. Finally, one should not discard the negative regulatory pressure especially in the US, which may not be of direct importance to Bitcoin but may affect the stable coin. and exchange.

In a Jan. 21 post, US Senator Elizabeth Warren Post cited a report that said “rogue governments are using crypto to evade sanctions and undermine our national security.” While the cryptocurrency community rushes to explain that “fiat is the currency of choice for financial crimes,” while it may be true, it doesn't discount the potential negative consequences of regulatory actions and their subsequent impact on prices.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.