TBW - Bitcoin falls back, caught by inflation and rising rates
The weekend sell-off once again confirmed what markets already know: digital assets remain tightly correlated to the macroeconomic environment. Bitcoin fell roughly 6% over seven days, ending the week in the $78,000 zone after opening around $82,000.
The trigger: an April CPI print at 3.8% year-over-year (versus a 3.7% consensus), which sparked a risk-off move across equities and crypto alike. The Nasdaq 100 shed about 1.8%, while the altcoin market dropped nearly 8%.
Investors revised upward their expectations for restrictive monetary policy, pushing the easing timeline further out.
More nuanced factors in the background
The swift reversal in risk assets reflects a shift toward narrative-driven positioning against a backdrop of deteriorating fundamentals. Prediction markets now assign virtually no probability to a rate cut by year-end; instead, they price in roughly a 35% chance of a hike in December.
Sovereign yields confirm this reading: the US 10-year climbed into the 4.47–4.60% range, with the 30-year approaching 5.12%. In Japan, government bonds followed the same trajectory (10-year at roughly 2.74%, 30-year at 4.17%), signaling global macro instability that weighs heavily on high-beta assets, crypto first among them.
The leadership transition at the Federal Reserve adds another layer of uncertainty. Kevin Warsh, confirmed as Chair by a tight Senate vote (54 to 45), raises questions about his monetary policy orientation.
Will he prioritize dollar strength and inflation control through potential rate hikes? Or will he yield to political pressure for cuts, in a context where inflation refuses to recede? His track record points to a hawkish bias (he has consistently advocated for price stability and balance sheet reduction at the Fed), but geopolitics- and commodity-driven inflationary pressures objectively limit the central bank's room for maneuver.
On the capital flows front, global crypto ETPs recorded roughly $1.1 billion in outflows over the recent period, erasing a significant share of April's approximately $2.1 billion in inflows. A single-day outflow of $635 million from US spot Bitcoin ETFs on May 13, combined with around $722 million in liquidations (overwhelmingly long positions, at levels reminiscent of a bear market), accelerated the correction.
From a technical standpoint, bitcoin now faces the $76,000 liquidation wall, identified as immediate support.
>> The Kevin Warsh effect: when the Fed rattles gold and Bitcoin
The Big Whale's take
Bitcoin's temporary strength in April (fueled by continued purchases from Strategy and sustained ETF flows) did not withstand the deterioration in macro conditions. Stalling peace talks between the United States and Iran and the visit of a Chinese economic delegation failed to produce any meaningful positive surprises.
Meanwhile, oil prices surged to between $100 and $107 per barrel on renewed geopolitical tensions, pushing investors into deleveraging. Crypto, as the most leveraged risk asset, logically bore the brunt.
In the near term, Warsh's first decisions as Fed Chair will be a decisive signal for markets. But the central bank has a limited toolkit in the face of geopolitics- and commodity-driven supply shocks.
With mounting labor market pressures and the midterm elections on the horizon, monetary policy should, for the time being, favor consumer protection and stability over proactive support for risk assets.