Key considerations:
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Bitcoin came under pressure as rising oil prices and weak US data stoked risk sentiment, driving investors into gold.
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The increase in buybacks of private equity funds from BlackRock and Blackstone reflected growing anxiety among retail investors.
Bitcoin (BTC) saw a 7% correction between Thursday and Friday after a failed attempt to recover the $74,000 level. The rebound followed weak US macroeconomic data and higher oil prices as the US-Israel-Iran war entered its seventh day. Traders are now questioning whether Bitcoin can hold support above $65,000.
Usually, worsening economic conditions pave the way for monetary stimulus and often boost the stock market in anticipation of increased liquidity. However, the period saw the S&P 500 pull back as general risk-off sentiment erased all of Bitcoin’s gains from Wednesday.
US retail sales fell 0.2% in January from the previous month, while the US economy lost 92,000 jobs in February. Despite the cooling labor market, investors are not convinced that the Federal Reserve will cut interest rates further, as rising energy costs tend to put pressure on inflation.
US Treasury markets are currently pricing in a 78% probability that interest rates will remain steady between 3.5% and 3.75% until the end of April. The flight to safety came after gold rose as the small-cap Russell 2000 index hit a two-month low. Bitcoin’s fall from $85,000 at the end of January hampered its reputation as a correlated asset, especially as silver became the second most valuable asset.
Traders also fear a wave of corporate layoffs brought about by artificial intelligence automation. Kansas City Federal President Jeff Schmid noted that AI is increasingly filling roles that once required manual labor. Schmid added that “older Americans are retiring,” creating real-time structural changes in the labor market, according to Yahoo Finance.
War and credit crunch affect Bitcoin outlook
A long war of increasing US government spending suggests a reduction in fiscal capacity for monetary stimulus aimed at economic expansion. Investors are more afraid of rising logistics costs outside the financial sector. The major shipping company Maersk announced on Friday the temporary suspension of two routes connecting the Middle East to Asia and Europe.
Bitcoin’s retest of $68,000 on Friday suggests that the level of technical resistance identified by analysts may be secondary to geopolitical events affecting the oil and energy industries and, by extension, global growth prospects. The current weakness in risk assets appears to be a reflection of macroeconomic weakness rather than a structural failure.
related to: Lynn Alden advises that Bitcoin will outperform gold for the “next two to three years”.
A potential slowdown in traders’ expectations could be taking a toll on the US private credit market. BlackRock has limited withdrawals from one of its largest debt funds after a surge in withdrawal requests, according to a Bloomberg report on Friday. Earlier this week, private equity fund Blackstone met requests for a record 7.9% stake offering, signaling a growing retail concern.
Currently, the 3% option-adjusted spread for risky companies is within the normal range for the past six months. Periods of significant economic turmoil typically push this rate above 5.0%, a level last seen in March 2023. As a result, there is no clear indication that Bitcoin will fall below $65,000, even with the continued uncertainty surrounding global economic growth.
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