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As of the latest update, Bitcoin is trading at $117,729.81, facing challenges in maintaining gains from its peak of $126,000, as short-term positioning trends and risk-averse flows overshadow the medium-term debasement narrative.
The debasement trade concept gained traction following a report from JPMorgan released on Oct. 1. This concept hinges on the belief that fiscal expansion and currency devaluation will enhance the demand for tangible assets.
As a result, assets that retain purchasing power, like gold and Bitcoin, would benefit under such circumstances. In this context, gold achieved a new all-time high of $4,059.38 on Oct. 10.
However, if gold is gaining from the debasement trade, why has Bitcoin declined by 4.2% over the week?
Short-term pressure
The US dollar has risen by 1.3% this week, nearing what may be its strongest weekly close since mid-November 2024.
This movement was initiated after Japanese government bonds hit their highest yield in 17 years, bolstering the US dollar.
Mid-week, traders began to reduce risk exposure as discussions of a stock bubble emerged, driven by stocks trading close to their all-time highs.
On Oct. 10, President Donald Trump threatened tariffs against China in response to its dominance over rare-earth elements, which are crucial for the tech hardware supply chain.
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Reflections on market structure
The macroeconomic changes impacted one of Bitcoin’s key supports for price movement, specifically the demand from exchange-traded funds (ETFs).
Despite attracting over $1.2 billion on Oct. 6, marking the second-largest daily inflow on record, Bitcoin ETF flows decreased to $875.6 million the next day.
Data from Farside Investors indicates that the inflows dwindled further on Oct. 8, amounting to $440.7 million. On Oct. 9, Bitcoin ETFs recorded nearly $198 million in inflows, the lowest figure during their nine-day streak of positive inflows.
On Oct. 10, the threat from Trump led to a risk-off reaction, resulting in long liquidations totaling $807 million within 24 hours, with $580 million lost in just four hours.
Temporary setback
Despite the current volatile environment, Bitcoin still seems positioned for strong performance in the fourth quarter.
The pause in equities, the fluctuating demand for safe-haven assets, and the end-of-week trading shock have diminished investors’ eagerness to buy at peak levels.
Moreover, Bitcoin’s consolidation appears to be a result of profit-taking following a 7% increase to $126,000 rather than a decline in fundamentals.
The debasement narrative remains relevant, but the cleanup of positioning and flow dynamics will likely influence short-term price movements before macroeconomic tailwinds regain influence.
The post If the debasement trade would catapult Bitcoin, why is the market down? appeared first on CryptoSlate.
