Bitcoin’s (BTC) recent fluctuations underscore how markets often overreact, particularly during potentially escalating situations like trade wars. Although the S&P 500 has seen a 6.5% decrease since its peak on February 19, this dip may appear modest in absolute terms, the implications for earnings are considerably more significant. Nevertheless, futures markets indicate that Bitcoin’s dip below $83,000 is expected to be temporary.
Traders frequently liquidate assets upon sensing an impending recession. Currently, investors are shifting towards cash and short-term government bonds. This trend elucidates why the US 2-year Treasury yield recently fell to its lowest level in five months. Traders are accepting lower yields, indicating robust buying interest.
US 2-year Treasury yield (left) vs. Bitcoin/USD (right). Source: TradingView / Cointelegraph
Despite a 16% correction following the unsuccessful attempt to breach $99,500 on February 21, Bitcoin derivatives markets have remained resilient. This stability suggests that major stakeholders, including whales and market makers, do not anticipate further declines. Importantly, even if the long-awaited US strategic digital asset reserves do not gain congressional backing, significant political momentum at the state level continues to support these initiatives.
Bitcoin 2-month futures annualized premium. Source: Laevitas.ch
As of March 4, Bitcoin futures have sustained a steady annualized premium of 6.5% (basis rate) over spot markets, remaining unchanged from the previous week. This figure stays within the neutral range of 5% to 10% observed over the last four weeks, revealing that professional traders remain unaffected by recent volatility and maintain confidence in market stability.
Bitcoin 30-day options delta skew (put-call). Source: Laevitas.ch
The 25% delta skew (put-call) for Bitcoin options was measured at 4% on March 4, indicating balanced pricing between put (sell) and call (buy) options. Following the failed bid to regain the $94,000 support on March 3, limited demand for protective puts reflects investor resilience.
Bitcoin’s dip below $83,000 reflects macroeconomic uncertainty
US Senator Cynthia Lummis forecasts that state governments may integrate Bitcoin into their strategic reserves ahead of the federal government. Utah’s HB230 “Blockchain and Digital Innovation Amendments” bill has already successfully passed the House, and if it receives Senate approval, it could allocate up to 5% of state reserves to Bitcoin through qualified custodians or exchange-traded funds (ETFs).
Nonetheless, Bitcoin’s capacity to regain bullish momentum is closely linked to the overall sentiment in traditional markets. Traders are concerned that price declines of 20% or more over two weeks for companies like Tesla, TSM, Broadcom, and ARM may indicate that the artificial intelligence sector is in a bear market, which could adversely affect sales for major corporations and dampen investor appetite for riskier assets.
Concerns are rising that US economic growth may slow, a scenario that appears likely based on the Atlanta Fed’s estimation of real GDP. Should the US economy contract by 2% or more in Q1, valuations of publicly listed companies could experience significant drops. Additionally, increasing vacancies in commercial real estate could elevate credit risks, intensifying pressure on the banking sector.
The recent fall of Bitcoin below $83,000 doesn’t closely correlate with the success or failure of the US digital asset strategic reserve. Instead, investors are retreating from riskier assets, including artificial intelligence stocks and consumer discretionary companies. On March 3, spot Bitcoin ETFs experienced $74 million in outflows, adding to the prevailing uncertainty. Investors are apprehensive about weak institutional demand, indicative of a challenging macroeconomic environment.
It’s likely that Bitcoin’s price will remain below $90,000 until the S&P 500 demonstrates a standard correction has concluded—investors typically scale back on risky assets when recession fears arise. Still, Bitcoin derivatives data suggests that the risk of a more significant drop is minimal for the time being.
This article is intended for general informational purposes only and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily represent or reflect the views or opinions of Cointelegraph.
