Bitcoin’s price experienced another round of volatility over the weekend, dropping 5% on Sunday to fall below the $80,000 threshold before stabilizing near $82,000. This decline positions the cryptocurrency approximately 25% below its all-time high of $109,900. Analysts link this downturn to ongoing trade tensions arising from President Donald Trump’s recent tariff policies and fears of a potential recession.
Simultaneously, the US Dollar Index (DXY) has weakened, descending from 110 to 103 since mid-January, a development coinciding with Trump’s second term. This may serve as a bullish catalyst for Bitcoin’s price. In a series of posts on X, Jamie Coutts, Chief Crypto Analyst at Realvision, reflects on the current market landscape. He identifies two key metrics that could influence central bank policy—and thus, Bitcoin’s future. “Bitcoin is like playing a game of Chicken with central banks,” Coutts asserts.
Coutts explains that while the dollar’s recent decline provides a bullish framework for Bitcoin, increasing volatility in Treasury bonds (tracked by the MOVE Index) and widening corporate bond spreads raise concerns. He emphasizes that US Treasuries serve as a crucial global collateral asset; any spike in their volatility could result in lenders imposing larger haircuts on collateral, tightening overall liquidity. “Rising volatility forces lenders to apply haircuts on collateral, thereby tightening liquidity. […] Above 110 [on the MOVE Index], I suspect central planners will be particularly concerned,” Coutts warns.
Over the past three weeks, spreads for US investment-grade corporate bonds have been widening, a trend that Coutts regards as a sign of potential pressure on risk assets, including Bitcoin: “This indicates a fading demand that has kept yields compressed in relation to Treasuries, and further widening could adversely affect risk assets.”
Nonetheless, Coutts maintains an optimistic outlook for Bitcoin’s medium-term potential, chiefly attributed to the dollar’s abrupt decline. He points out that such substantial drops have historically aligned with bullish pivots in Bitcoin’s price. “These occurrences coincided with bear market troughs or mid-cycle bull market trends,” Coutts states.
Despite the limited historical data available for Bitcoin, Coutts highlights key catalysts that may propel the digital asset higher:
- Nation-State Adoption: “A global nation-state race is underway,” he explains, envisioning a scenario where countries either incorporate Bitcoin into their strategic reserves or increase their mining efforts.
- Corporate Accumulation: Coutts mentions that companies—particularly MicroStrategy (MSTR)—may be set to acquire 100,000 to 200,000 BTC this year.
- ETF Positions: Exchange-traded funds could “double their positions,” thereby boosting institutional investments.
- Liquidity Dynamics: Referring to the famous catchphrase, Coutts remarks, “The Spice Must Flow.”
Furthermore, Coutts believes that Bitcoin is “filling a significant gap” and reiterates that a drop below the high-$70,000 range would indicate a fundamental market shift. He perceives central bankers inching closer to potential intervention as Treasury volatility and credit spreads continue to grow: “If volatility in Treasuries and bond spreads continues to rise, asset prices will keep declining, likely prompting central planners to take action.”
In conclusion, Coutts succinctly summarizes his perspective on Bitcoin’s position in the financial landscape: “Consider Bitcoin a high-stakes game of chicken with central planners. With their options becoming increasingly limited—and assuming HODLers remain unleveraged—the odds appear to be tilting in favor of Bitcoin holders.”
At present, the world’s leading cryptocurrency is navigating a precarious balance between macroeconomic challenges, indicated by the turbulent bond market, and positive trends stemming from a weakening dollar. The trajectory of Bitcoin—whether it continues to decline or resumes its long-term growth—will likely hinge on the responses of global policymakers to escalating pressures in the bond market and the readiness of holders to engage in this relentless game of chicken with central banks.
As of the latest update, BTC is trading at $82,091.
