Bitcoin’s recent correction below $96,000 has led to a shift in the cryptocurrency market, with a noticeable decline in market confidence, referred to as the market turning “pink.” This rally, while significant, shows signs of weakening demand from both retail and institutional investors.
Though Bitcoin’s movements appear disconnected from traditional cryptocurrency fundamentals, it’s increasingly influenced by an unpredictable macroeconomic environment. Despite trade tensions between the U.S. and China causing market unease, Bitcoin continues to attract attention. However, indicators from derivatives, sentiment, and investment flows point to growing caution among investors.
New tariffs imposed by China on U.S. goods dampened risk appetite, and Bitcoin lost its bullish momentum, aligning with a broader trend of investors shifting to safer assets amid these geopolitical concerns. While a political response from former President Donald Trump, including a 25% tariff on steel and aluminum, helped stabilize traditional markets, Bitcoin also found some support and regained confidence.
However, market fundamentals reveal underlying weakness in both retail and institutional activity. For instance, institutional purchases of Bitcoin ETFs in the U.S. amounted to $204 million between February 3 and February 7, much lower than the $742.3 million worth of Bitcoin purchased by Strategy during the same period. Additionally, the sharp drop in futures premiums—from 11% in early February to 8%—suggests leveraged traders are reducing their exposure.
Investors are increasingly turning to safe-haven assets, as seen in the decline of yields on U.S. Treasury notes. This shift has strengthened the U.S. dollar index, reflecting a rise in global risk aversion. Furthermore, recent signals from the U.S. Federal Reserve indicate there’s less urgency to cut interest rates, putting additional pressure on Bitcoin’s bullish prospects.
