At the time of writing, Bitcoin is trading at $117,729.81, struggling to extend gains from its all-time high of $126,000 as short-term positioning dynamics and risk-off trends dominate the medium-term downside.
The theory of trade degradation gained popularity after JPMorgan released a report on the subject on October 1st. This theory is based on the expectation that fiscal expansion and currency devaluation will drive demand for hard assets.
Therefore, assets with purchasing power, such as gold or Bitcoin, would be advantageous in this situation. Against this backdrop, gold hit a new all-time high of $4,059.38 on October 10th.
But if gold is benefiting from the downtrend, why did Bitcoin fall 4.2% on the week?
short term pressure
At the time of writing, the US dollar is up 1.3% on the week, approaching its highest weekly close since mid-November 2024.
The move began after Japanese government bonds hit their highest yield in 17 years and the U.S. dollar strengthened.
Traders began to avoid risk midweek when talk of a stock bubble surfaced in the market, with stocks hovering near all-time highs.
On October 10, President Donald Trump threatened to impose tariffs on China in response to China’s restrictions on rare earth elements that support the supply chain of high-tech hardware.
Consideration of market structure
Macroeconomic developments have impacted demand from exchange-traded funds (ETFs), which are one of the primary supports for Bitcoin price movements.
Despite hitting the second-highest single-day inflow of more than $1.2 billion on October 6, Bitcoin ETF inflows dropped to $875.6 million the next day.
On Oct. 8, the flow tapered further, reaching a total of $440.7 million, according to data from Farside Investors. On October 9th, Bitcoin ETFs recorded nearly $198 million in inflows, the smallest amount in a nine-day positive streak.
On October 10, President Trump’s threat triggered a risk-off agitation that resulted in long-term liquidations totaling $807 million in 24 hours, with $580 million disappearing in just four hours.
temporary setback
Despite the current volatile situation, Bitcoin still looks poised for a strong fourth quarter.
A pause in stock prices, volatile haven bidding and a weekend trade shock reduced investors’ urgency to add on higher prices.
Moreover, Bitcoin’s price action reflects profit-taking after a 7% rally to $126,000, rather than deteriorating fundamentals.
While the downside narrative remains, cleanup and flow dynamics positioning will likely dictate near-term price action before macro tailwinds regain control.