The current market environment is challenging for Bitcoin and digital assets in general.
First, capital flows remain unfavorable. Since October, large Bitcoin investors have sold holdings worth around USD 29 billion. This behavior aligns with historical patterns in the middle of a halving cycle, where selling phases often last several months. While smaller investors continue to accumulate, their demand so far is insufficient to fully absorb the selling pressure. At the same time, institutional inflows remain weak: digital asset ETPs have seen net outflows year-to-date.
Second, Bitcoin is currently decoupled from global money supply trends. Historically, the price closely followed the growth of global M2 liquidity. This relationship is currently disrupted, which could indicate either a misjudgment by investors or an upcoming liquidity tightening. Given the still-expansive monetary policy, the latter seems unlikely in the short term.
Third, geopolitical tensions weigh on the market environment. During periods of acute uncertainty, investors favor traditional safe havens such as gold, while Bitcoin suffers from its hybrid role as both a risk asset and a store of value.
Additionally, monetary policy uncertainty in the US is a factor. The designated Federal Reserve Chair, Kevin Warsh, is seen as a proponent of a tighter interest rate policy, further clouding Bitcoin’s short-term outlook.
In the long term, however, the outlook remains constructive, as structural concerns about currency depreciation persist and the current lag behind liquidity trends signals potential for catch-up.
