Market Analysis: Bitcoin risks testing the $50,000 zone despite the rebound
The recent recovery of Bitcoin (BTC) above the $65,000 mark should not be misleading. In my firm belief, based on an analysis of market flows and macroeconomic factors, the leading cryptocurrency may once again come under pressure and drop into the $50,000 zone. This is not panic, but a sober assessment of the current risk-reward ratio.
Last week, BTC broke its prolonged four-week losing streak, bouncing off support around $60,000. This rebound was made possible by the synchronized action of two key factors that had long been moving in opposite directions.
Macroeconomic tailwind
The first factor is the May US inflation data. The annual Consumer Price Index (CPI) came in at 4.2%, marking a high since April 2023. However, this figure matched market expectations. The key point was that debt market participants had feared a higher reading. Core CPI slowed to 2.9%, signaling that the peak of the energy impulse has passed, rather than accelerating further.
The second, and more significant factor, is the de-escalation of the geopolitical conflict between the US and Iran. After more than 100 days of confrontation, the parties reached a deal that includes opening the Strait of Hormuz and lifting the naval blockade. Formal signing is scheduled for June 19 in Switzerland. As a result, Brent crude oil has plummeted from $110 to levels above $80 over the past month, losing 6.6% in the last week alone.
The reduction in the geopolitical risk premium has pulled down the dollar and government bond yields. Cheaper oil directly improves the inflation outlook. Thus, the CPI data and the news of the conflict's cessation worked in unison, amplifying rather than canceling each other out. I see the first Federal Reserve meeting under Kevin Warsh, scheduled for June 17, as the nearest catalyst.
Why the bottom has not yet been reached?
The main question now is not "when will the market turn around?" but "when will the inflow of liquidity resume?" Bitcoin remains a macro asset that grows on excess liquidity flowing through three channels: stablecoins, exchange-traded funds (ETFs), and public companies holding cryptocurrencies (DAT).
Analysis shows that none of these channels show signs of a reversal. Assets under management of DAT companies have shrunk from approximately $220 billion to $140 billion, and the attraction of new capital beyond Strategy, Bitmine, and Strive has nearly ceased. Exchange-traded funds are experiencing their longest streak of outflows since launch. The inflow of funds into stablecoins is also on a downward trajectory.
As I have repeatedly noted, the previous cycle began with the approval of ETFs and the subsequent inflow of institutional capital. Now, institutions remain on the sidelines, while retail investors are focused on trading stocks and leveraged funds. Until there is a reversal in capital flows, it is premature to declare that the bottom has been reached.
My conclusion: The risk-reward ratio in the low $60,000 range looks attractive in the long term. Each sell-off leaves behind an increasingly resilient base of holders. Nevertheless, I do not rule out that Bitcoin may first drop into the $50,000 zone before the situation begins to improve. Investors should focus on capital flows rather than price headlines.