Bitcoin price rebound breaks down before key level is hit — Here is why
Source: Coin Tegraph
Bitcoin (BTC) gained 6.8% between March 5 and March 6, briefly reclaiming $92,000. However, the trend reversed after the S&P 500 fell 1.3%, triggered by a warning from Philadelphia Federal Reserve President Patrick Harker about the US economy. Other factors also kept Bitcoin’s price below $95,000, such as rising tensions in Ukraine and uncertainty over potential US digital asset strategic reserves.
S&P 500 futures (left) vs. Bitcoin/USD (right). Source: TradingView / Cointelegraph
Philadelphia Fed president Harker said there is growing evidence that the consumer sector is “under stress,” especially for lower-income groups, according to YahooFinance. Harker backed a “pragmatist” approach for the US central bank “in this environment of uncertainty” while adding that price pressures will “continue to retreat.” Harker’s comments suggest support for bigger rate cuts by the Fed, but they do not signal strength for the economy.
Traders increase cash and cash-equivalent positions when they fear an economic recession, regardless of whether the causes are socio-political, such as the conflict in Ukraine, or centered on the outlook for the artificial intelligence sector. For Bitcoin to break above $95,000, a scenario of reduced uncertainty is required, even if the outcome is higher inflation, which is inherently positive for scarce assets—given the impact on fixed-income instruments.
The escalating war tensions and fears of a recession, fueled by the tariff dispute, pushed the S&P 500 volatility index (VIX) to its highest levels in 11 weeks. This indicates that investors are more risk-averse than usual. Historically, under such conditions, Bitcoin has performed poorly, at least in the days immediately following local peaks in the VIX indicator.
Bitcoin/USD (left, orange) vs. S&P 500 VIX volatility. Source: TradingView / Cointelegraph
Currently, at 24, the S&P 500 volatility index is significantly higher than its level of 16 two weeks ago and is now closer to its highest point in 7 months. However, a likely consequence of worsening economic conditions is an expansion of the monetary base, as central banks are compelled to stimulate their economies.
On March 6, China hinted at having “more room to act on fiscal policy amid domestic and external uncertainties,” while the European Central Bank stated that monetary policy is becoming “meaningfully less restrictive.”
History has repeatedly shown that an increase in money circulation is highly favorable for Bitcoin, whether it is viewed as a risk-on asset or a hedge instrument. Lyn Alden, a macroeconomics analyst, noted that Bitcoin moves in the “direction of global liquidity 83% of the time in any given 12-month period, which is higher than any other major asset class.”
However, Lyn Alden’s research highlights that Bitcoin is not immune to short-term volatility driven by “idiosyncratic events or internal market dynamics,” as seen with the speculation surrounding the US digital asset strategic reserve. For Bitcoin to regain its bullish momentum, investors are anticipating a clear resolution from the upcoming Crypto Summit organized by the Trump administration.
Related: How can Bukele still stack Bitcoin after IMF loan agreement?
If Trump’s plans merely involve halting sales of the government’s current Bitcoin holdings from administrative seizures, for example, this would likely be interpreted negatively by traders. Even if it becomes clear that any Bitcoin purchases depend on Congressional approval, this would still allow investors to reassess the potential upside, as it provides clarity on Trump’s expectations and plans.
Additionally, a positive outcome from the March 7 Crypto Summit could encourage other countries and listed companies to explore Bitcoin as a reserve asset, potentially paving the way for a sustained bull run toward $95,000 and beyond.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
