Bitcoin price falls below $90,000 as investors brace for looming economic risks

Bitcoin (BTC) came under significant selling pressure on January 13, falling below $90,000 for the first time in eight weeks. The decline tempered traders’ optimism, with prices down 12.5% ​​in seven days. Nonetheless, Bitcoin derivatives indicators indicated a neutral to bearish outlook, suggesting that whales and market makers were not significantly affected by the economic downturn.

Bitcoin futures monthly contracts typically trade at a premium to the spot market due to their longer settlement periods. The current annual premium of 11% exceeds the neutral range of 5-10%, reflecting the optimism of market participants. Likewise, funding rates for perpetual BTC contracts preferred by retail traders remain positive, indicating a neutral to positive sentiment.

For a brief period on January 13, the funding rate went negative due to increased demand for bearish positions. This change coincided with the liquidation of $107 million in leveraged long positions. However, the indicator quickly normalized to 0.5% per month, preventing a sustained decline in the Bitcoin futures market.

Bitcoin price comes under pressure as investors exit risky markets

Investor sentiment worsened as the S&P 500 index failed to surpass the 6,000 mark on January 6 and fell 4.1% the following week. A stronger-than-expected U.S. jobs report raised concerns that the Federal Reserve could keep interest rates higher for longer than expected.

This uncertainty has caused the yield on the 10-year U.S. Treasury note to soar to its highest level since November 2023, a sign that traders are demanding higher returns to hold the bonds. These dynamics often reflect fears of inflation or recession due to weakness in the broader stock market.

The rise in the value of the U.S. dollar relative to a basket of foreign currencies as measured by the DXY index indicates that major investors are taking a cautious stance, preferring cash and short-term bonds. According to Yahoo!, geopolitical tensions have intensified since the United States imposed stricter sanctions on Russian crude oil exports, threatening supply chains to major consumers such as China and India. financial resources.

Some analysts argue that Bitcoin’s recent performance is overly dependent on MicroStrategy. On January 13, the company announced the completion of another Bitcoin purchase, adding 2,530 BTC in less than a week. This boosted overall Bitcoin holdings by a significant amount, with support reaching $6.5 billion in authorized share sales. Additionally, the company plans to raise $2 billion through a permanent preferred stock offering.

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Institutional Bitcoin flows indicate mixed sentiment.

The outflow of $718 million from the U.S.-listed spot Bitcoin exchange-traded fund (ETF) over two days raised questions about institutional demand. However, inflows of $1.94 billion over the previous three sessions suggest it may be premature to conclude that interest in Bitcoin is waning. Despite recent volatility, Bitcoin has demonstrated resilience, with a 37% gain over the past 90 days.

Traders should consider the risks associated with a potential global economic slowdown as uncertainty drives investors into cash positions. No matter what actions President-elect Donald Trump takes, the U.S. fiscal outlook for 2025 appears likely to remain challenging.

Recession risks remain visible, as policy flexibility to avoid triggering inflation is limited. This environment could dampen the short-term appetite for Bitcoin as investors prioritize safety over assets deemed risky.