Key takeaways:
– Spot market demand through US-listed ETFs and Strategy’s BTC buying supports Bitcoin’s bullish momentum
– Low leverage among Bitcoin bulls reduces the risk of cascading liquidations even if prices drop another 5%
– Rising inflation concerns negatively impact fixed-income returns, paving the way for an eventual rotation from gold into Bitcoin
Bitcoin (BTC) fell about 7% after testing $76,000 on Tuesday. The pullback followed US equity weakness prompted by a spike in oil after Israel struck Iran’s largest gas processing facility and a hotter-than-expected US producer price index.
Despite the decline, Bitcoin’s broader bullish momentum shows little sign of fading, given how the S&P 500 and US Treasuries have reacted amid worsening macro conditions. Bulls appear to be avoiding excessive leverage, reducing the chance of cascading liquidations.
The S&P 500 traded roughly 4% below its all-time high on Wednesday despite softer US labor data and continued geopolitical risk from the Iran conflict. Initial jobless claims were steady at about 1.85 million for the week ending March 7. On Wednesday, wholesale prices rose 3.4% year-over-year in February, the largest gain in 12 months.
As oil climbed above $98, markets grew more convinced the Federal Reserve cannot ease policy in 2026. The CME FedWatch Tool showed the odds of rates remaining unchanged by September dropped to 42% on Wednesday, down from 89% a month earlier, based on futures-implied probabilities.
Bitcoin under pressure as prolonged war risks heighten investors’ risk aversion
Sticky inflation and the prospect of a prolonged conflict lowered expectations for expansionary policy, pushing investors toward risk-off positioning. Still, interest-rate pricing relative to inflation expectations does not suggest panic selling.
The 2-year Treasury yield traded around 3.71%, while the Cleveland Fed’s 2-year inflation expectation was about 2.27%, leaving an adjusted return near 1.44%. In episodes of extreme fear, demand for government bonds typically pushes real returns toward zero or negative; by contrast, current levels don’t indicate such extreme bond demand.
Even if Bitcoin falls another 5% in coming weeks, evidence points to limited leverage from bulls and low liquidation risk. Recent gains have been supported chiefly by spot demand—especially US-listed spot Bitcoin ETFs—and MicroStrategy’s continued aggressive accumulation.
CoinGlass estimates forced liquidations of $450 million in leveraged long Bitcoin futures would push prices down to $68,000, an amount representing under 1% of the roughly $49 billion aggregate open interest. The perpetual futures funding rate shows increasing short-side leverage, indicating bears are taking on more risk.
A negative funding rate means shorts pay to hold positions. Notably, funding remained below the neutral annualized range even as BTC topped $76,000, reinforcing the idea that spot accumulation, not speculative derivatives use, has been the main driver.
Gold slid to around $4,900 on Wednesday after holding above $4,800 for weeks. A rotation out of gold into Bitcoin could drive a sustained Bitcoin rally, especially as rising inflation undermines expected fixed-income returns. Overall, there’s little evidence the current bullish momentum in Bitcoin has dissipated.
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