Bitcoin (BTC) briefly lost the $90,000 level to hit $88,900 on Jan. 13 after falling nearly 7% amid the macroeconomic uncertainty gripping the markets, according to Bitfinex’s latest Alpha report.
The report noted that the price drop coincides with a reversal in market sentiment. Spot Bitcoin exchange-traded funds (ETFs) experienced net outflows on 7 of the last 12 trading days.
Despite a strong start to the year, marked by nearly $1 billion in inflows on Jan. 3 and Jan. 6, momentum reversed with $718 million in outflows on Jan. 8 and Jan. 10. These developments coincide with macroeconomic pressures, including rising Treasury yields and the Federal Reserve policy.
The US 10-year Treasury yield reached 4.79%, its highest level in 14 months. The surge impacts Bitcoin by increasing the opportunity cost of holding non-yielding assets and drawing institutional investors toward safer, yield-generating options like government bonds.
Regarding the new Fed stance, hawkish minutes from the Federal Open Market Committee (FOMC) and stronger-than-expected US job growth have decreased the likelihood of rate cuts in 2025, tightening financial conditions and curbing liquidity in speculative markets like crypto.
Treasury yields’ dual pressure
Rising Treasury yields exert a dual pressure on Bitcoin. Higher yields attract institutional capital toward bonds while tightening financial conditions reduce overall liquidity.
As a result, institutional investors rebalance portfolios, favoring bonds over volatile, non-yielding assets like Bitcoin. Additionally, higher borrowing costs decrease inflows into speculative markets, amplifying the downward pressure on Bitcoin’s price.
Historically, Bitcoin has reacted more rapidly to such shifts than equities due to its higher volatility and sensitivity to liquidity changes. For example, while equities may take months to reflect higher yields, Bitcoin often reacts within weeks, as seen during previous yield spikes.
Bitcoin’s price trajectory remains tied to US equities, particularly the S&P 500 (SPX). The BTC-SPX correlation, typically strongest in the first quarter, suggests that Bitcoin will continue to mirror broader market trends.
While the SPX reversed its 3.1% rally from early January, Bitcoin has maintained relative resilience. It has still been up 42% since the 2024 election day low of $67,541.
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 and the prospect of more favorable crypto policies have bolstered confidence in the market, offering a counterbalance to broader risk-asset challenges.
With Bitcoin hovering near critical support at $90,000, the market is likely to enter a ranging environment characterized by periods of consolidation. The evolving macroeconomic backdrop—shaped by rising Treasury yields, hawkish Fed signals, and ETF outflows—suggests a challenging road ahead for risk assets.
However, Bitcoin’s resilience compared to traditional equities signals that it may continue to attract investor interest, mainly as regulatory clarity improves. For now, Bitcoin holders face a balancing act, navigating macroeconomic headwinds while awaiting potential tailwinds from policy and sentiment shifts.
