Bitcoin Under Pressure: Macro Headwinds and Dwindling Spot Demand Threaten Year-End Outlook
Bitcoin’s resilience is being tested as the cryptocurrency recently slipped below the $90,000 mark. Despite attempts by bulls to mount a recovery, momentum proved fleeting, leaving Bitcoin hovering around the $90,000 threshold. Analysts at cryptocurrency exchange Bitfinex have issued a stark warning: Bitcoin’s underperformance compared to U.S. equities signals a critical lack of spot buying interest, rendering it highly susceptible to broader macroeconomic shifts.
Global Bond Market Turmoil Drags Down Risk Appetite
This subdued performance in the crypto market unfolds against a backdrop of significant turbulence in global bond markets. Investor anxieties surrounding potential spillover effects from instability in the Japanese bond market have triggered a sharp surge in long-term government bond yields worldwide. The U.S. 10-year Treasury yield, for instance, climbed to 4.19%, marking its highest level in nearly three months. Concurrently, government bonds in the UK and other European nations faced significant sell-offs, while Japan’s 10-year bond yield continued its ascent, nearing 2%—a level not seen in almost two decades.
The ripple effects of this bond market upheaval have inevitably impacted U.S. equities. Monday saw the S&P 500 Index decline by 0.5% and the Nasdaq Index by 0.3%, further dampening overall market risk appetite.
Fed’s Final Rate Decision Looms Large
Adding to the market’s cautious stance, this week’s primary focus remains on the Federal Reserve’s final interest rate decision meeting of the year. While markets have largely priced in a 25-basis-point rate cut for December, any hawkish signals from the Fed regarding the future trajectory of rate cuts or the potential implementation of liquidity measures could still ignite significant market volatility on Wednesday.
Joel Kruger, Market Strategist at LMAX, offered his perspective, stating, “Any easing of financial conditions or a weakening U.S. dollar would undoubtedly provide a tailwind for the crypto market. Conversely, if the Fed adopts an unexpectedly hawkish tone regarding the pace or scale of its easing policies, it could significantly exacerbate downward pressure on digital assets.”
Bitfinex Highlights Bitcoin’s “Structural Weakness”
Despite Bitcoin’s modest rebound from its November lows, Bitfinex analysts caution that the market is grappling with a dual challenge: “structural weakness” compounded by “declining spot demand.” Bitfinex highlights a growing “divergence” between Bitcoin and traditional markets. While the S&P 500 Index approaches all-time highs, Bitcoin remains trapped in a narrow trading range, a clear indication of the cryptocurrency market’s relative fragility.
To underscore this assessment, Bitfinex identifies several critical indicators:
- Persistent Selling Pressure: U.S.-listed spot Bitcoin ETFs continue to experience outflows. Traders appear to be ‘selling the rallies’ rather than accumulating, with the Cumulative Volume Delta (CVD) on major exchanges—a metric reflecting shifts in buying and selling power—showing a distinct negative bias, indicating seller dominance.
- Significant Unrealized Loss: Over 7 million Bitcoins are currently held in an ‘unrealized loss’ position. This widespread on-chain pessimism echoes the consolidation phase observed in 2022, suggesting considerable overhead supply.
- Inadequate Capital Inflow: While capital flows remain positive, with approximately $8.69 billion in net monthly inflows (as measured by the net change in realized capitalization), this figure is significantly below peak levels. Such limited inflows offer only a meager buffer against potential downside risks.
Bitfinex analysts conclude that these converging factors paint a picture of an exceptionally fragile market structure heading into the year-end. The report states:
“As spot demand wanes, the market faces the challenge of significantly thinner buying support. This erodes immediate price stability and heightens the market’s susceptibility to external shocks, macroeconomic volatility, and any renewed tightening of financial conditions.”
Disclaimer: This article is provided for market information purposes only. All content and views are for reference only and do not constitute investment advice, nor do they represent the views and positions of BlockBeats. Investors should make their own decisions and trades. The author and BlockBeats will not bear any responsibility for direct or indirect losses incurred by investor transactions.
