Key takeaways:
- War, rising oil prices and Strategy’s Bitcoin sales put additional pressure on BTC’s $60,000 support.
- Strategy’s sale of Bitcoins and fears that global regulatory crackdowns on cryptocurrencies will begin again further aggravate the unstable situation on the cryptocurrency market.
Bitcoin fell 3.5% on Wednesday as fresh developments in the U.S.-Iran war sent oil prices higher and Japanese bond markets faced renewed stress. This combination resulted in broader risk reduction across all markets. At the same time, concerns about Strategy’s potential Bitcoin sales have intensified, with investors now preparing for a possible correction below $60,000.
Nasdaq-100 futures (left) vs. Bitcoin/USD (right). Source: TradingView
Bitcoin’s failed attempt to claw back $64,500 on Monday coincided with a downtrend in the technology-based Nasdaq index. However, on Wednesday, the stock market recovered some of its losses, while Bitcoin was unable to recover from the $62,000 level. These destitute results suggest that something else may be putting pressure on the cryptocurrency.
A keen rise in Brent crude prices to $74 from $68 the previous week increased inflation risks due to energy supply disruptions following the official end of the memorandum of understanding between the US and Iran. US President Donald Trump announced the end of the deal after US strikes targeted Iranian sites in response to ship attacks.
Higher energy costs directly feed into broader price pressures, reducing the likelihood of short-term interest rate cuts by the Federal Reserve (Fed) and limiting the chances of economic stimulus packages being introduced.
Implied rates for the Fed funds target rate as of September 16. Source: CME FedWatch Tool
Traders now estimate the probability of an interest rate hike by September at 69%, up from 42% a month earlier. This environment is heavily weighted towards risky assets, and Bitcoin is still not widely seen as an effective hedge.
Global economic uncertainty amid selling pressure from Strategy
President Trump also deepened the cautious mood when, at a NATO summit, he demanded an end to U.S. trade with Spain, labeling the key ally a “wasted cause” for not committing to fresh defense spending targets. Such trade frictions could ponderous global economic activity and augment fears of a global economic contraction.
Yield on 10-year Japanese government bonds. Source: TradingView
In Japan, government bond yields rose to their highest level in 30 years, reflecting concerns about the lack of central bank independence as it tries to adjust the policy mandate of the Central Bank of Japan to “achieve a stronger economy.” Japan is the largest foreign holder of U.S. Treasuries, increasing the risk of global infection.
Latest round Bitcoin sales with a total value of $216 million, announced on Monday by Strategy (MSTR US) negatively surprised many people after revealing that they took place outside the core $1.25 billion monetization program. Company 8-K filings stated that the program only takes into account proceeds used to finance cash reserves.
Investors are now concerned about continued selling pressure from Strategy as the company manages its capital structure and debt obligations, with a combined annual dividend alone of $1.76 billion. Additionally, Strategy has over $3.8 billion in convertible debt with an earliest maturity date of April 2027.
Related: Lyn Alden says Bitcoin doesn’t need a savior as Strategy sells BTC for $216 million
Strategy Maturity and market value of convertible debt, USD. Source: Strategy
On the regulatory side, the documents show that India’s central bank strongly supports a policy leaning towards prohibiting cryptographic activitiesincluding prohibiting banks from any exposure to virtual assets in order to protect financial stability. The Indian tax department further highlighted the risk of tax evasion.
Signals of tighter global surveillance add another layer of negative pressure on Bitcoin’s price and market sentiment. Bitcoin bears remain in check, with risk appetite waning due to socio-political instability, the prospects of a more restrictive US Fed monetary stance, and the strategy’s ongoing cash needs.
Sentiment is likely to remain volatile, making a retest of the $60,000 support level increasingly likely in the near term.
