Bitcoin has been on a lackluster run for over a week now and is struggling to hold above $96,000.
Bitcoin’s sideways and poor performance comes amidst the absence of catalysts, both in terms of the regulatory environment and the high uncertainty surrounding the course of the economy, business, and monetary policy.
The cryptocurrency market is still waiting for the new regulatory environment to become clearer under the presidency of Donald Trump. The regulatory turmoil in recent years and the severe restrictions imposed on companies in the sector prevent them from operating more freely.
This in turn has ultimately led to the withdrawal of some of the most prominent companies, including Silvergate Bank, according to its chairman Mike Lempres in an opinion piece in The Wall Street Journal, who seems optimistic about Trump’s move to ban any activity of the Operation Choke Point procedures, which restricted companies’ access to the financial system, and what Congress might do to ease those restrictions.
Additionally, uncertainty is rife in the broader business sector of the U.S. economy in light of Trump’s recent actions on several vital issues. This is what The Journal’s Editorial Board also expressed in an opinion piece, citing that the National Federation of Independent Business’s small business optimism index fell in January, in addition to the uncertainty index rising to its third-highest level on record.
The hesitation among business owners comes with uncertainty over tariffs, immigration, and federal spending, which is reflected in the broader stock market’s lackluster performance, according to a separate report from The Journal earlier this week. Naturally, the weak risk appetite in the stock market is negatively affecting cryptocurrencies with higher risks.
On top of all that, cryptocurrencies are facing a tightening outlook for monetary policy from the Federal Reserve. Yesterday, the central bank’s chairman, Jerome Powell, testified before Congress that there is no need to rush to adjust the degree of monetary tightening given the current level of economic activity. This has kept investors divided on the pace of rate cuts later this year. The probability that the Fed will keep the current range unchanged in June is 50%, according to CME FedWatch Tool.
Until the regulatory environment, foreign trade policy, and monetary policy path – the biggest concerns at the moment – unfold, Bitcoin may remain vulnerable to sharp downward pressure. This is reflected in the net negative inflows of Bitcoin spot ETFs over the past two sessions of nearly $240 million, according to SoSo Value. The number of new addresses added to the Bitcoin blockchain is also trending downward and yesterday, Sunday, recorded its lowest level since October of last year.
