Bitcoin risks consolidation as Treasury yields rise and economic outlook weakens – Bitfinex

Bitcoin (BTC) briefly lost the $90,000 mark, reaching $88,900 on January 13 after experiencing a nearly 7% decline amid the macroeconomic uncertainty affecting the markets, according to Bitfinex’s latest Alpha report.

The report highlighted that the price decline coincided with a shift 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, characterized by nearly $1 billion in inflows on January 3 and January 6, momentum shifted with $718 million in outflows on January 8 and January 10. These trends align with macroeconomic pressures, including rising Treasury yields and Federal Reserve policies.

The US 10-year Treasury yield reached 4.79%, marking its highest level in 14 months. This increase affects Bitcoin by raising the opportunity cost of holding non-yielding assets and attracting institutional investors towards safer, yield-generating alternatives such as government bonds.

Regarding the new Fed position, hawkish minutes from the Federal Open Market Committee (FOMC) and stronger-than-expected US job growth have diminished the likelihood of rate cuts in 2025, tightening financial conditions and limiting liquidity in speculative markets like crypto.

Treasury yields’ dual pressure

Rising Treasury yields impose a dual pressure on Bitcoin. Higher yields draw institutional capital towards bonds, while tighter financial conditions reduce overall liquidity.

As a result, institutional investors are rebalancing their portfolios, favoring bonds over volatile, non-yielding assets like Bitcoin. Additionally, increased borrowing costs diminish inflows into speculative markets, intensifying the downward pressure on Bitcoin’s price.

Historically, Bitcoin has responded more swiftly to such changes than equities due to its higher volatility and sensitivity to liquidity fluctuations. For instance, while equities may take months to reflect higher yields, Bitcoin often reacts within weeks, as observed during previous yield spikes.

Bitcoin’s price movement remains linked to US equities, particularly the S&P 500 (SPX). The BTC-SPX correlation, typically strongest in the first quarter, indicates that Bitcoin will continue to mirror broader market trends.

While the SPX reversed its 3.1% rally from early January, Bitcoin has shown relative resilience. It remains 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 regarding potential regulatory changes. President-elect Donald Trump’s new term and the possibility of more favorable crypto policies have enhanced market confidence, providing a counterbalance to broader risk-asset challenges.

With Bitcoin hovering near significant support at $90,000, the market is likely to enter a ranging environment characterized by periods of consolidation. The evolving macroeconomic landscape—shaped by rising Treasury yields, hawkish Fed signals, and ETF outflows—suggests a challenging path ahead for risk assets.

Nevertheless, Bitcoin’s resilience compared to traditional equities indicates that it may continue to attract investor interest, especially as regulatory clarity improves. For the time being, Bitcoin holders face a balancing act, navigating macroeconomic challenges while awaiting potential positive shifts from policy and sentiment changes.

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