Bitcoin’s early-week rally began to fade after U.S. markets opened on Thursday, sending the cryptocurrency down nearly 2% in the past 24 hours to $71,400.
The move comes alongside declines in global stock markets as the war in Iran shows little sign of ending quickly, sending oil up 5.3% to $78.70 a barrel. The Dow Jones Industrial Average fell 1.4% and the S&P 500 fell 0.7%.
The Nasdaq, on the other hand, fell by only 0.4% while the software sector, previously battered, benefited from significant support. The iShares Expanded Tech-Software Sector ETF (IGV) is up 2% and is now up about 9% over the past five sessions.
This divergence is notable because bitcoin has been closely tied to the software sector, with both falling simultaneously since October on investor concerns about AI-related disruption and rebounding from each of their lows in tandem in recent days.
New bullish surge or bearish rebound?
Bitcoin ‘isn’t out of the woods yet,’ said Arthur Hayes, Maelstrom’s chief investment officer, noted that despite the rally to $74,000, the correlation with the IGV ETF persisted. It remains to be seen whether Thursday’s decoupling will last, but seeing software sector values climb while bitcoin retreats is not what bullish crypto investors wanted. “It could be a technical rebound,” Hayes added.
Traders could also take some profits today ahead of February’s key US jobs report, due on Friday. Recent economic data has generally exceeded expectations, reducing the chances of a resumption of rate cuts from the Federal Reserve.
Interest rate traders at the Chicago Mercantile Exchange now see an 88% chance that the Fed will keep rates steady not only at this month’s meeting, but also in April. A month ago, those odds were 59%.
“We are cautiously constructive, but the geopolitical risk at the back of the pack requires humility,” said Bryan Tan, a trader at Wintermute. He said improving flows into spot bitcoin exchange-traded funds (ETFs), which saw nearly $2 billion in inflows in the past week alone, accompanied by stabilizing trading volumes, is supporting the market, while limited response to disruptions around the Strait of Hormuz may leave room for bitcoin to climb toward the $74,000-$75,000 range.
Bitfinex analysts said there had been a “notable increase in spot market strength,” indicating that the recent rise was driven by market buyers rather than speculative leverage.
“We consider that there is a possibility of relief in the coming weeks and months if this trend continues,” they added.
