On Jan. 13, Bitcoin faced notable selling pressure, dipping under $90,000 for the first time in two months. The 12.5% decline over the week dampened trader enthusiasm, though derivatives indicators painted a neutral to slightly bearish picture, hinting that larger investors like whales and market makers were relatively unaffected by the drop.
Bitcoin futures contracts, which typically trade at a premium due to their longer settlement periods, showed an annualized premium of 11%, surpassing the typical 5%-10% neutral range. This highlights a sense of optimism among market participants. Additionally, funding rates for perpetual Bitcoin contracts—favored by retail traders—remained positive, pointing to a stable or mildly bullish sentiment.
Although the funding rate briefly turned negative on Jan. 13, driven by an increase in bearish bets, it quickly rebounded to 0.5% per month. This shift occurred as $107 million in leveraged long positions were liquidated, but the swift normalization indicates the bearish sentiment did not linger in futures markets.
Broader Market Concerns Weigh on Bitcoin
Investor sentiment took a hit after the S&P 500 index failed to sustain levels above 6,000 on Jan. 6, leading to a 4.1% decline over the following week. A stronger-than-expected US jobs report stoked fears that the Federal Reserve might maintain higher interest rates longer than anticipated.
This uncertainty pushed the yield on 10-year US Treasury bonds to its highest level since November 2023, reflecting increased demand for higher returns on government debt—a signal of inflationary or recessionary concerns. Weakness in equities compounded the cautious mood across financial markets.
Meanwhile, the US dollar strengthened against other major currencies, as reflected in the DXY index, showcasing a shift toward safer investments like cash and short-term bonds. Geopolitical risks also rose after the US announced stricter sanctions on Russian crude oil exports, raising supply chain concerns for key importers such as China and India.
Some experts suggest Bitcoin’s recent performance has been overly tied to MicroStrategy’s activities. On Jan. 13, the company disclosed a purchase of 2,530 BTC within a week, further boosting its substantial holdings. Supported by $6.5 billion in approved share sales, the firm also plans to raise an additional $2 billion through preferred stock offerings.
Institutional Flows Show Mixed Signals
US-listed spot Bitcoin exchange-traded funds (ETFs) saw $718 million in outflows over two days, prompting questions about institutional interest. However, inflows of $1.94 billion in the three prior sessions suggest it might be too soon to declare a sustained decline in demand. Despite the volatility, Bitcoin has managed a 37% gain over the past 90 days, reflecting its enduring resilience.
That said, traders should remain cautious about potential headwinds from a slowing global economy. Economic uncertainty is driving investors toward cash and safer assets. The US fiscal landscape for 2025, even with policy adjustments by President-elect Donald Trump, is expected to face challenges.
With limited room to maneuver without exacerbating inflation, the risk of a recession looms. This environment could temper short-term enthusiasm for Bitcoin, as investors seek refuge in less volatile options.
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