Bitcoin attempts modest recovery, yet macro headwinds persist, say analysts

Don't want to miss the best from Business Standard?

The flagship cryptocurrency Bitcoin (BTC) attempted to claw back from losses on Tuesday, posting a mild recovery to reclaim the $87,000 level after briefly slipping below $84,000. The rebound comes as BTC extends a drawdown of more than 33 per cent from its October peak of $126,198. Intraday, the world’s largest cryptocurrency traded between $83,862 and $87,325, with volumes at $74.35 billion, according to CoinMarketCap.

 

BTC now trades near last month’s eight-month low. Analysts remain cautiously optimistic but note that liquidity conditions and global macro developments will shape the near-term trajectory.

 

The recent slide, they said, has been triggered by a combination of thin liquidity, elevated leverage, concerns around Digital Asset Treasury (DAT) structures, and broader macro pressures, including a stronger US dollar and rising global yields. Profit-taking and institutional rebalancing have further fuelled volatility across crypto markets.

Liquidity stress, DAT overhang keep traders on edge

Rather than a structural breakdown, analysts believe the BTC correction has been largely driven by poor liquidity and concerns around DAT structures. Mohit Kumar, head of markets research at Delta Exchange, said the decline was “further amplified by high leverage in the system and breakdown of key technical level of $100,000 in November.”

 

According to him, US government shutdowns in October and November worsened domestic liquidity shortages, weighing on BTC prices. Concerns have also grown around potential selling from DATs, with several funds trading at or below their modified net asset value (mNAV).

 

That said, Kumar remains cautiously optimistic, noting that the world’s largest BTC treasury company has secured sufficient capital to meet interest and dividend commitments for over a year, implying “no imminent selling expected from DATs.”

 

He projected a rebound in BTC over the next four to eight weeks to $95,000–$100,000 levels, pointing to improved US liquidity following the resumption of government operations and the potential for Federal Reserve balance-sheet expansion from January.  ALSO READ | Crypto markets wobble: BTC sinks below $86k, ETH gives up $3k; what's next?

Macro moves dominate institutional positioning

Some analysts said macro pressures continue to overshadow other developments, influencing institutional positioning in crypto markets. “A strengthening US dollar, Japanese bond yields spiking to unprecedented highs, and the market subsequently being forced to sell its long-term positions to match the borrowed rate of Yen to its current market conditions are overshadowing all other updates in terms of market sentiment,” said Nischal Shetty, founder, WazirX.

 

Shetty added that institutional rotation and crypto asset selling have eclipsed steady inflows from ETFs and other structural channels. Investors, he said, remain cautious amid inflation risks and ongoing macro uncertainty. While potential Fed easing could revive risk appetite, he advised a balanced approach:

 

“Holding more liquidity is important while keeping some exposure to top-tier crypto. A strong dollar and rising global yields call for smaller position sizes, but possible global easing means maintaining flexibility,” said Shetty.

Profit-taking and thin liquidity heighten swings

Analysts also noted that profit-taking, weakening momentum, and macro headwinds have further amplified BTC volatility. According to Paras Malhotra, SVP of trade, custody, and BizOps at CoinDCX, the downturn reflects “a broader shift toward risk-off sentiment rather than a structural breakdown in fundamentals.”

 

On-chain trends, he observed, suggest a possible market floor, supported by “rising exchange outflows and a slowdown in miner selling.” That said, he cautioned that weak demand and liquidity could extend downside risks.

 

In such conditions, Malhotra recommended prioritising risk management through higher cash buffers, lower leverage, diversified portfolios, and disciplined stop-loss or hedging strategies.