Why Is Bitcoin Down Today? 5 Reasons BTC Can’t Break $80,000 Despite $40 Trillion US Debt

Bitcoin has slipped further below $80,000 and is trading near $77,527. It is down 3% in the past 24 hours and 5% over the week. Many investors are wondering why. The US is carrying about $40 trillion in debt, inflation is close to 4%, oil prices are high amid the conflict with Iran, and Bitcoin is still not breaking out.

James Lavish, a former Wall Street investor who writes about Bitcoin and macroeconomics, says several forces are holding the price in place. Some of them are easy to miss.

The Rest Of The Market Is Also Falling

The weakness is spread across the crypto market, according to market data:

• Ethereum: $2,237.76, down 3.9% in 24 hours and 7.4% over 7 days
• BNB: $703.19, down 6.6% in 24 hours and 5.7% over 7 days
• XRP: $1.25, down 2.9% in 24 hours and 5.5% over 7 days
• Solana: $96.98, down 3.4% in 24 hours and 7.5% over 7 days

Reason 1: AI Is Soaking Up The Money

Lavish says a large share of investor money has gone into AI stocks. Most of the S&P 500’s gains this year have come from a small group of companies, and much of the cash that might otherwise go into Bitcoin is tied up in those bets.

Reason 2: Cash And Bonds Pay Well Again

Investors can now earn a solid return just by holding cash. Some are also buying long-term bonds yielding about 5%, hoping to profit if interest rates fall. Lavish calls long-term bonds a poor investment over time, but he sees why some traders are using them for a quicker gain.

Reason 3: The Hidden Sellers

The least obvious pressure, Lavish says, comes from long-time Bitcoin holders who sell call options on their BTC to earn extra income. Here is how that creates selling:

• The holders usually sell those calls to a market maker
• The market maker then owns the calls and has to protect itself against price moves
• To do that, it sells Bitcoin equal to about 30% to 40% of the position

For example, if a market maker holds calls covering $1 million of Bitcoin, it may need to sell $300,000 to $400,000 worth of BTC as a hedge. Lavish says this is happening now and adds steady selling pressure.

Reason 4: Leverage Keeps Bitcoin In A Box

Lavish says leverage built into “paper Bitcoin” products is keeping the price range-bound. Bitcoin is also a much bigger market than in 2013 or 2014, when a small amount of money could move it thousands of dollars. Moving it now takes far more capital.

Reason 5: The Fed And Tight Credit

Lavish says the Federal Reserve has been tightening lending conditions, which leaves less spare money for risk assets. Investors are also trying to judge where the economy stands on growth, manufacturing and inflation. Until that becomes clearer, Bitcoin, gold, the Nasdaq and the S&P 500 all look stuck in a holding pattern.

Did October’s Crash Mark The Top?

Lavish also pointed to a major deleveraging event in October, when large numbers of leveraged traders were wiped out. He said it may have played a part in setting Bitcoin’s peak. After 30 years on Wall Street, he said, it is hard not to suspect that someone took advantage of the moment. He added that it could also have been a chain reaction, similar to the UK’s 2022 bond crisis, when forced selling by pension funds set off a wider sell-off.

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