Bitcoin faces volatility amid economic realities and rising Treasury yields

Bitcoin (BTC) has faced significant volatility recently, influenced by macroeconomic factors and regulatory developments. according to Bitfinex AlphaBitcoin’s price fell to $91,430 last week, extending a correction from its record high of $108,100 on December 17, 2024. The cryptocurrency fell more than 15% amid growing market caution, driven by rising US Treasury yields and continued outflows from ETFs. In Bitcoin.

Economic factors affecting Bitcoin

The rise in US Treasury yields, which reached a 14-month high of 4.79%, has led to a redirection of institutional investments away from riskier assets such as Bitcoin. Historically, Bitcoin has reacted quickly to rising yields, but the current impact is exacerbated by the US Department of Justice’s plans to liquidate $6.5 billion worth of seized Bitcoin. This news contributed to a 7.2% drop in Bitcoin’s price, exacerbating market concerns about potential volatility.

Flexibility amid market pressures

Despite these macroeconomic pressures, Bitcoin is showing remarkable resilience. Since the US election, Bitcoin has risen 42%, outperforming stock markets that lost their post-election gains. However, with the Fed signaling smaller interest rate cuts and tightening financial conditions, Bitcoin may face increased volatility in the short term. Optimism remains about the new administration’s potential cryptocurrency-friendly regulations, which could mitigate deeper losses and maintain Bitcoin’s strength in the long term.

US economic forecasts

Recent economic data reveals that the US economy ended 2024 with a strong labor market and unexpected growth in the services sector. In December, the labor market added 256,000 non-farm jobs, exceeding expectations and recording the strongest monthly growth since March. Key industries such as healthcare, retail and entertainment are leading the trend, with unemployment falling to 4.1% and wages rising 3.9% year over year. This strong job growth, coupled with stable wage increases, supports strong consumer spending, a cornerstone of the US economy.

Global regulatory developments for cryptocurrencies

In global cryptocurrency news, the UK Treasury’s decision to exempt cryptocurrency staking activities from Collective Investment Scheme (CIS) regulations provides clarity and flexibility to blockchain businesses, fostering innovation and strengthening the UK’s position as a cryptocurrency-friendly jurisdiction. Meanwhile, in Hong Kong, the Monetary Authority’s launch of a DLT regulatory environment provides banks with a regulated environment to adopt blockchain solutions such as token deposits while managing the associated risks.

However, the cryptocurrency market is facing uncertainty after the Department of Justice authorized the liquidation of $6.5 billion in Bitcoin seized from Silk Road. This planned sale has intensified fears of market volatility, challenging the pro-crypto sentiment that recently pushed Bitcoin to all-time highs, and underscoring the delicate interplay between policy decisions and market sentiment.

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