Bitcoin stuck under $80,000 as the strongest US manufacturing indicator since 2022 raises liquidation concerns.

The factory sector in the United States has just issued its loudest “risk on” signal in years, coinciding with a particularly challenging moment for Bitcoin.

On February 2, Howard Lutnick, the U.S. Secretary of Commerce, declared that:

“The United States has achieved manufacturing growth, all due to President Trump's trade policies.”

This announcement came on the heels of the Institute for Supply Management’s report indicating that the Manufacturing PMI increased to 52.6 from 47.9 in January. This marked the end of a year-long period of contraction and represented the most robust reading since mid-2022.

The report showed that new orders skyrocketed to 57.1, production rose to 55.9, and backlogs grew to 51.6. Customer inventories dropped to 38.7, entering the “too low” territory that often signals upcoming restocking and increased factory activity.

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This combination of recovering demand and reduced inventories creates a situation that can transition markets from a defensive stance to an opportunistic one.

However, Bitcoin is approaching this macro turning point already in a vulnerable position. BTC is trading around $78,000, having experienced a decline of approximately 38% from its all-time high near $126,000 in 2025, along with a recent wave of volatility that has dampened market sentiment.

Given this context, the inquiry is not if the PMI figure appears strong. The real question is whether this PMI surprise will ease financial conditions or persuade investors that the Federal Reserve must maintain restrictive policies for an extended period, thereby keeping liquidity tight and suppressing speculative assets.

A risk-on signal with an asterisk

A PMI score above 50 indicates expansion, and January’s rise to 52.6 is significant enough that numerous analysts characterize it as the quickest improvement in manufacturing conditions since 2022.

Market analysts observed that the underlying composition of the increase showed a typical pattern of restocking.

They noted that customers allowed their inventories to dwindle before starting to place new orders, which boosts production, backlogs, and supplier activity.

If this trend continues for several months, it could facilitate a broader uptick in industrial activity.

The Institute for Supply Management itself cautioned against making direct correlations between this single figure and a straightforward recovery.

According to the institute, a significant portion of the January increase likely reflects post-holiday reordering and preemptive measures against tariff-induced price hikes. These factors can inflate short-term data while borrowing demand from later in the year.

This nuance is crucial for crypto. Bitcoin’s genuine moments of resurgence usually require sustainable macro impulses, rather than one-month surges.

A single PMI report will not prompt a reevaluation of the entire asset class unless subsequent months—February, March, and beyond—confirm this trend, ideally with new orders maintaining in the mid-50s and some signs that price pressures are easing.

When stronger growth becomes a headwind

For risk assets, stronger growth can be positive, unless it suggests prolonged higher rates.

The Prices index at 59.0 shows that input costs are still increasing at a significant rate. Concurrently, the Federal Reserve is maintaining its policy rate in the 3.50%-3.75% range and has emphasized that future decisions will rely on incoming data and continuing progress on inflation.

If investors interpret “growth is back” as “inflation risk is back,” Treasury yields and the dollar may rise. This tightens financial conditions, which typically weighs on assets that rely on low interest rates and plentiful liquidity, including Bitcoin.

In recent years, BTC has increasingly behaved like a high beta equity: performing best when real yields are decreasing, credit is accessible, and liquidity is increasing.

Nevertheless, it faces challenges when policy appears tight.

This perspective helps clarify why Bitcoin has not responded favorably to every positive macro report.

In the current environment, stronger economic activity can lead to fewer rate cuts or delayed cuts, which can dampen the “risk on” momentum that would otherwise benefit crypto.

‘Bitcoin is not the economy'

Within the crypto community, the recent surge in PMI has rekindled an ongoing debate about whether the PMI rating indicates an imminent rally.

Andre Dagosch, Bitwise's head of research for Europe, has argued that it is simplistic to overlook the information embedded in the recent rally of precious metals and the reflation signals from ISM. He contends that similar PMI reversals in 2013, 2016, and 2020 coincided with some of Bitcoin’s most significant bull runs.

ISM Manufacturing Index (Source: Bitwise)

This perspective is also supported by Joe Burnett, vice president of Bitcoin strategies at Strive Asset Management, who pointed out that this latest move ended 26 consecutive months of contraction and that past breakouts above 50 have frequently marked key turning points for BTC.

However, others are contesting this optimistic view.

Benjamin Cowen, founder of ITC Crypto, highlighted that using the ISM as a directional guide for Bitcoin can be perilous.

His preferred case study is 2014 and 2015. In January 2014, the ISM was approximately 52.5, while BTC was trading near $737. By December 2014, the ISM had risen to about 55.7, yet Bitcoin had dropped to around $302.

In January 2015, ISM was near 54.0, with BTC around $322. By the end of that year, ISM had fallen to roughly 48.8, while Bitcoin had climbed to about $429.

According to him, anyone who relied on the ISM to forecast Bitcoin’s trajectory during those years would have been incorrect twice. When the ISM increased in 2014, BTC fell. When the ISM decreased in 2015, BTC rose.

Cowen argues that a similar divergence could occur in 2026. The index was at 52.5 in January 2014 and 52.6 in January 2026, indicating almost identical levels.

He envisions a plausible scenario in which ISM rises throughout 2026 while Bitcoin experiences a down year, much like it did over a decade ago.

Underwater in the regulated wrapper

Cowen’s argument merits attention because Bitcoin is no longer just an offshore trading asset; it is now included in U.S. spot exchange-traded funds (ETFs) held in brokerage and retirement accounts.

These 12-listed products hold approximately 1.29 million BTC, representing about 6.5% of the circulating supply, and attracted around $62 billion in net inflows at their peak.

Alex Thorn, Galaxy Digital’s Head of Research, suggested that the recent pullback has brought BTC’s price approximately 7% to 10% below the average creation cost of ETFs, which he estimates to be between $84,000 and $90,200.

In dollar terms, ETF investors are sitting on unrealized losses of roughly $7 billion.

Unlike early self-custody holders, this group consists of advisers and institutional allocators who must adhere to portfolio guidelines and scrutiny from risk committees. A position that is down 30% to 40% within a regulated framework necessitates tough decisions at the end of the quarter.

Notably, the ETF flows already reflect this pressure. January marked the third-worst month on record for U.S. spot Bitcoin ETFs, with approximately $1.6 billion in net outflows, as per Coinperps data.

Simultaneously, on-chain data indicate a “supply gap” in the $70,000–$80,000 range, where relatively few coins have been traded recently, and a significant portion of recent sales has come from groups that purchased near the highs above $111,000.

Realized price and the 200-week moving average, two closely monitored cycle indicators, cluster in the high-$50,000s. Historically, these levels have represented strong entry points, but they also sit roughly 20%–25% below current prices.

This is the challenge presented by the ISM breakout.

On one side, macro strategists like Raoul Pal argue that expansionary PMI readings are a “necessary condition” for sustained strength in crypto, particularly when coupled with increasing liquidity.

Conversely, the actual holders of the ETF-era market are facing negative P&Ls and liquidity that, for the time being, is moving in the opposite direction.

What next for Bitcoin?

The true test arises if those two narratives remain misaligned. Picture a year where ISM steadily increases, sub-indices remain robust, and metals continue to trade as a reflation hedge while Bitcoin approaches its realized price and 200-week moving average in the high-$50,000s.

For ETF issuers, this would entail marketing a macro-hedge product that has underperformed both the S&P 500 and the commodities it was meant to complement.

They would need to clarify to advisers why the narratives of “debasement hedge” and “digital gold” have not yielded results during a period of genuine world stress and reflation.

Therefore, aligning the January ISM data with Bitcoin’s current framework presents three broad scenarios that stand out.

Goldilocks restocking, the bullish breakout case

In the optimistic scenario, PMI stays above 50 for several months, New Orders hover around or above 55, and the Prices index begins to decrease from 59.0 towards the mid-50s. Growth seems solid, but inflation indicators are subdued enough that the market maintains expectations for rate cuts in the latter half of 2026.

Equities would likely continue to rise, credit spreads would remain contained, and real yields could diminish.

For Bitcoin, this combination, alongside indications that long-term holder selling has slowed and that on-chain levels like the realized price near $56,000 and the 200-week moving average near $58,000 are nearing, could finally revitalize dip buyers.

ETF outflows might stabilize or reverse, volatility could increase from compressed levels, and the overall environment would resemble past risk-on periods that led to significant BTC rallies.

Hot growth with sticky inflation is a macro headwind for BTC

In the second scenario, PMI remains steady or increases further, while the Prices index stays close to 59.0 or rises. Markets conclude that growth is strong enough to keep the Federal Reserve cautious, and the anticipated path of rate cuts shifts to lower magnitude or a longer timeline.

In that context, Treasury yields and the dollar may strengthen, financial conditions may tighten, and the opportunity cost of holding non-yielding, volatile assets may increase. Equities might still respond positively for a period, particularly in cyclical sectors, but Bitcoin would need to navigate a macroeconomic backdrop that penalizes duration and speculation.

With ETF holders already facing losses and risk committees cautious, this scenario makes it more challenging for BTC to convert a solid PMI reading into a sustained breakout.

A false dawn, the return of risk off

In the third scenario, January’s surge proves to be temporary. If the boost from post-holiday reordering and tariff hedging diminishes, and if subsequent PMI readings slide back toward 50 or below, markets could encounter the worst combination for crypto: growth optimism declines, but leverage has already been reduced and ETF outflows have already taken place.

Bitcoin would still be grappling with the aftermath of its post-2025 peak, with significant supply last traded between about $80,000 and $92,000 and a distinct “ownership gap” between $70,000 and $80,000.

In such a scenario, the price could drift toward the realized price of around $56,000 and the 200-week moving average near $58,000, levels that have historically indicated cycle bottoms, but it would do so without the support of a convincing macroeconomic growth narrative.

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