Bitcoin faces volatility due to economic realities and soaring government bond yields.

Bitcoin (BTC) has experienced significant volatility recently due to the impact of macroeconomic factors and regulatory developments. Bitcoin price fell to $91,430 last week, extending the correction from its all-time high of $108,100 set on December 17, 2024, according to Bitfinex Alpha. The cryptocurrency fell more than 15% as surging U.S. Treasury yields and continued fund outflows raised market concerns. Bitcoin spot ETF.

Economic Factors Affecting Bitcoin

With U.S. Treasury yields reaching a 14-month high of 4.79%, institutional investors are moving away from risky assets such as Bitcoin. Historically, BTC has responded quickly to yield spikes, but the current impact has been exacerbated by the U.S. Department of Justice’s plans to liquidate $6.5 billion worth of seized Bitcoin. The news helped send the price of Bitcoin down 7.2% and heightened market concerns about potential volatility.

Resilience under market pressure

Despite these macroeconomic pressures, Bitcoin has shown remarkable resilience. Following the US election, BTC rose 42%, outperforming the stock market which lost post-election gains. However, Bitcoin could see higher near-term volatility as the Federal Reserve signals it will cut interest rates and tighten financial conditions further. There remains optimism about cryptocurrency-friendly regulations from the new administration that could mitigate further losses and maintain BTC’s long-term strength.

US economic outlook

The U.S. economy finished 2024 with a strong labor market and unexpected growth in the services sector, according to recent economic data. The labor market added 256,000 nonfarm jobs in December, exceeding expectations and marking the strongest monthly growth since March. Key industries such as healthcare, retail, and entertainment are leading this trend, with unemployment falling to 4.1% and wages rising 3.9% compared to the previous year. Robust job growth along with stable wage growth support strong consumer spending, a cornerstone of the U.S. economy.

Development of global cryptocurrency regulations

In global cryptocurrency news, the UK Treasury’s decision to exempt cryptocurrency staking activities from Collective Investment Scheme (CIS) regulations will provide clarity and flexibility to blockchain businesses, encouraging innovation and strengthening the UK’s position as a cryptocurrency-friendly jurisdiction. Strengthen your position. Meanwhile, in Hong Kong, the Monetary Authority has launched a regulatory sandbox for distributed ledger technology, providing banks with a structured environment to adopt blockchain solutions such as tokenized deposits while managing associated risks.

Nonetheless, the cryptocurrency market faces uncertainty after the DOJ authorized the liquidation of $6.5 billion worth of Bitcoin seized from Silk Road. The planned sale has deepened fears of market volatility, challenged the pro-cryptocurrency sentiment that has recently driven Bitcoin to record highs and highlighted the sensitive interplay between policy decisions and market sentiment.

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