Research Firm Warns of Three Major Risks as Bitcoin Faces Potential Decline

crypthub

about 15 hours ago

Market Conditions and Downside Risks

Bitcoin remains below $70,000, with Ecoinometrics warning against a recovery base due to weakening equity momentum, structural volatility shifts, and a neutral Federal Reserve stance. The cryptocurrency’s performance is now closely tied to broader markets, amplifying downside risks as equities lose steam and liquidity support remains limited. Recent stabilization does not signal a bottom but a pause within a bear phase, with ETF outflows and a “risk-off” environment reinforcing bearish structure.

Structural Shifts in Bitcoin’s Behavior

Bitcoin’s volatility has declined compared to prior cycles, driven by institutional demand via ETFs, which offer steadier flows than retail-driven surges. This shift integrates Bitcoin into institutional portfolios alongside growth stocks, reducing volatility but increasing sensitivity to equity market declines. The 200-day moving average above $100,000 highlights Bitcoin’s bearish trend, contrasting with the Nasdaq 100’s slower decline but still rising average.

Federal Reserve Policy and Market Stability

The Fed’s neutral stance balances inflation progress and resilient labor markets, avoiding urgent rate cuts or hikes. This stability reduces sudden policy shocks but fails to provide tailwinds for Bitcoin. In a fragile market, steadiness may be preferable to tightening, yet it offers minimal support if risk assets decline. Institutional integration strengthens Bitcoin’s long-term durability but deepens its vulnerability to equity market drawdowns.