Bitcoin (BTC) has been unable to sustain levels above $66,000 since July 31, despite achieving a 5.2% gain between Oct. 3 and Oct. 7. Some analysts assert that Bitcoin benefits from the ever-growing United States federal debt; however, while this correlation appears valid, it has minimal influence on short-term price trends.
In reality, socio-political events seem to be the primary driver of Bitcoin’s limited upside, considering that the global monetary base (M2) has expanded from $104 trillion in June to $108 trillion in October, while Bitcoin was rejected multiple times at the $68,000 resistance level. This suggests that the rally to $64,000 is unlikely to be rooted in the US fiscal situation.
Bitcoin/USD vs. global monetary base (M2, billion). Source: TradingView
Additional evidence weakening this relationship is that the US dollar has strengthened against other major global currencies, as measured by the DXY index—which rose to 102.5 on Oct. 7, up from 100.4 on Sept. 30. If investors fear that US government debt is spiraling out of control, why are they cashing out of euros, British pounds, or Swiss francs?
Recent US macro data was not favorable for Bitcoin’s price
To understand why Bitcoin’s price has consistently failed to sustain levels above $66,000 over the past eight weeks, one should begin by analyzing what is limiting the improvement of investor sentiment. For example, uncertainties regarding global economic growth, the escalating Middle East conflict, and the impact of the upcoming November US Presidential elections are significant factors.
The stronger-than-expected September US jobs data released on Oct. 4 reduced the odds of an economic recession. However, it also caused the implied probability of a 0.50% interest rate cut to drop to 0%, down from 40% just two weeks earlier, according to the CME FedWatch tool. Higher interest rates for a longer period make investors more risk-averse, which is detrimental to Bitcoin’s price.
Moreover, current macroeconomic data has led investors to raise their expectations for positive third-quarter corporate earnings, prompting global investment bank Goldman Sachs to increase its year-end 2025 S&P 500 target to 6,300, according to Reuters. Goldman noted that a “recovery in the semiconductor industry cycle” will further support earnings momentum.
Regardless of Bitcoin bulls’ views on how BTC price will react to a potential global economic recession, the latest stimulus measures announced by China significantly reduce the need for alternative hedges. The Hong Kong stock market index reached a 32-month high on Oct. 7, closing 9.3% above levels from Sept. 30, while the S&P 500 is trading 0.5% below its all-time high.
Bitcoin derivatives metrics and spot ETF outflows
Despite the overall bullishness in global stock markets, Bitcoin’s price has been unable to sustain levels above $66,000, and more importantly, derivatives traders’ sentiment remains neutral. The monthly BTC futures market's annualized premium serves as a primary gauge of bullishness.
In neutral markets, those derivative contracts typically trade at a 5% to 10% annualized premium to compensate for the longer settlement period. However, if the demand for leveraged longs (buy) increases, this premium can easily surpass 15% or 20%. Conversely, periods of bearishness result in negative premiums, also known as backwardation.
Bitcoin 2-month futures contract premium. Source: Laevitas.ch
Notice that the BTC futures annualized premium has remained at 8%, indicating that demand for leverage is relatively balanced between bulls and bears. Part of traders’ lack of conviction stems from recent flows in Bitcoin spot exchange-traded funds (ETFs), which have seen $335 million in net outflows since Oct. 1, according to Farside Investors data.
Ultimately, the reasons for Bitcoin being pinned below $64,000 are primarily due to a macroeconomic environment that has favored the stock market and investors seeking protection in cash positions ahead of socio-political uncertainties.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.