Bitcoin risks consolidation as government bond yields soar and economic outlook worsens – Bitfinex

Bitcoin (BTC) briefly lost the $90,000 level and reached $88,900 on January 13th after falling nearly 7%. Macroeconomic uncertainty grips the market, according to Bitfinex's latest Alpha report.

The report noted that the price decline coincides with a reversal in market sentiment. The Spot Bitcoin Exchange Traded Fund (ETF) has experienced net outflows in 7 out of the past 12 business days.

Despite a strong start to the year, featuring inflows of nearly $1 billion on January 3 and January 6, the year saw outflows of $718 million on January 8 and January 10. The momentum reversed. These developments are consistent with macroeconomic pressures such as increases in Treasury prices. Yields and Federal Reserve Policy.

The yield on the 10-year U.S. Treasury note hit a 14-month high of 4.79%. This surge is impacting Bitcoin by increasing the opportunity cost of holding non-yielding assets and drawing institutional investors to safer, yield-producing options such as government bonds.

As for the Fed's new stance, hawkish minutes at the Federal Open Market Committee (FOMC) and stronger-than-expected U.S. job growth reduce the likelihood of a rate cut in 2025, leading to tighter financial conditions. , liquidity in speculative markets such as virtual currencies has been suppressed.

Double pressure on government bond yields

Rising US Treasury yields put double pressure on Bitcoin. Rising yields attract institutional investors to bonds, while tighter financial conditions reduce overall liquidity.

As a result, institutional investors are rebalancing their portfolios, favoring bonds over volatile, lower-yielding assets like Bitcoin. Additionally, higher borrowing costs will reduce the inflow of funds into the speculative market, amplifying downward pressure on Bitcoin prices.

Historically, Bitcoin has been more volatile and more sensitive to changes in liquidity, so it has reacted more quickly to such changes than stocks. For example, stocks may take months to reflect rising yields, while Bitcoin often reacts within weeks, as was seen during previous yield spikes.

Bitcoin price movements remain tied to US stocks, particularly the S&P 500 (SPX). The correlation between BTC and SPX is typically strongest in the first quarter, suggesting that Bitcoin will continue to reflect broader market trends.

While SPX has reversed its 3.1% rise since early January, Bitcoin remains relatively resilient. It is up 42% from its low of $67,541 on election day in 2024.

Ranging environment

Amid macro pressures, Bitcoin's relative strength can be attributed to optimism over potential regulatory changes. President-elect Donald Trump's new term in office and the outlook for more favorable crypto policy are increasing confidence in the market and providing balance to broader risk asset challenges.

Bitcoin is hovering around the key support at $90,000, and the market is likely to enter a range environment characterized by a period of consolidation. The evolving macroeconomic backdrop, shaped by rising Treasury yields, hawkish Fed signals, and ETF outflows, suggests a difficult road ahead for risk assets.

However, Bitcoin's resilience compared to traditional stocks indicates that it may continue to attract investor interest, primarily as regulatory clarity improves. For now, Bitcoin holders face a balance between navigating macroeconomic headwinds while waiting for potential tailwinds from changes in policy and sentiment.

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