In the cryptocurrency market, Bitcoin lost value sharply on Friday and fell below 79 thousand dollars after testing 82 thousand dollars on Thursday. The recent price movement has fluctuated almost simultaneously with the index of small-cap stocks in the United States. This similarity shows that macroeconomic developments play a dominant role in the current selling pressure in Bitcoin.
Impact of Macroeconomic Factors
The Russell 2000 index, which excludes the 1,000 largest companies in the USA and thus consists mostly of smaller companies, differs from technology-focused stock markets and appears to be more vulnerable to harsh market conditions. Higher financing costs, especially in small-scale companies, make these companies more sensitive to fluctuations in interest rates. The tight correlation between Bitcoin and Russell 2000 also shows that cryptocurrency investors are cautious about possible risks.
Although Bitcoin has tested the $82,000 resistance many times, there has been no positive outlook on the annualized funding rate in futures in recent weeks. The indicator remained below the neutral threshold level of 6 percent, and interest in upside leveraged positions remained weak in the market. This indicates that the feeling of confidence in price increases has not yet been built.
Many investors may have chosen to reduce positions ahead of the upcoming weekend. While the war in Iran created a general risk perception in the markets, it was short-lived for the gains in technology stocks to take the Nasdaq 100 index to its historical peak. No concrete agreement emerged from the summit held by the USA and China in Beijing; only the promise that the USA would accelerate its exports of agricultural products over the next three years was brought to the agenda.
Volatility in Bond Markets
Investors’ concerns increased due to outflows in bond-related assets in global markets. It is anticipated that these outflows will open a fresh liquidity channel for Bitcoin in the medium term.
Statements by the Chinese Ministry of Foreign Affairs that the war in Iran “should never start” and “should not continue” increased geopolitical pressure. The Brent oil barrel price, which was 99 dollars a week ago, rose to 106 dollars on Friday. Rising oil prices were a factor that fueled inflation.
The possibility of central banks increasing liquidity to prevent recession has begun to price in. The 10-year government bond interest rate in Japan has reached its highest level in the last 20 years. In the Eurozone, the benchmark bond interest rate rose to 3.18 percent, reaching the highest level in the last 15 years. Outflows in fixed income assets are expected to trend towards cryptocurrency markets in the long term.
Behind Bitcoin’s short-term loss of power lies the strong correlation between small-scale stocks and crypto money in the USA, lack of interest in the upward trend, war in Iran and concerns about the upcoming economic crisis.
The main reasons for the weakness in Bitcoin’s price in the short term are; The high connection with small-scale American stocks stands out as reluctance to take bullish positions, geopolitical risks and fear of economic distress.
