Bitcoin (BTC) has failed to sustain a rally above the $92,000 level over the past month and is trading around the $88,000 range, well off its October peak of $126,200. While the S&P 500 has held near record highs, BTC has declined sharply from its highs, signaling a decoupling from traditional assets. From its October high of $126,200, BTC is down roughly 30% to around $88,000. Some analysts attribute the decline to AI-bubble concerns, but given the broader market strength, that explanation looks less convincing.
Market sentiment has shifted toward risk-off, with funds flowing into safe-haven assets like gold. The main headwind cited for BTC is the Federal Reserve’s ongoing balance-sheet reduction, which has been draining market liquidity. The Fed has reduced its balance sheet for much of the year to absorb liquidity. December employment data showed signs of weakness, and while policy has shown some easing, market nerves remain unsettled.
Global risk also stems from Japan, where the 10-year Japanese government bond yield rose past 2% for the first time since 1999, signaling softer bond demand amid weak fundamentals. Japan’s Q3 GDP contracted 2.3% year over year, underscoring a wobble in the economy and raising global-market risk. Cointelegraph cited that global growth slowdown and a tighter U.S. labor market have heightened risk-off sentiment, making BTC unlikely to serve as an inflation hedge in the near term.
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