Bitcoin briefly pushed toward $74,000 this week, supported by a series of bullish developments that have increasingly linked the crypto industry to traditional finance.
Some market watchers have started calling this a bull rally, with one analyst even saying the new trend “has legs.”
But the rally did not last. By the end of the week, the largest cryptocurrency had fallen back below $69,000, losing $110 billion in market capitalization.
This pullback occurred despite what might otherwise have been considered some of the most positive institutional news for the sector in months.
Morgan Stanley has appointed Bank of New York Mellon as the custodian for its spot exposure to Bitcoin ETFs, adding another layer of Wall Street infrastructure around the asset class. Crypto exchange Kraken gained access to the Federal Reserve Payments System, an important step in integrating crypto companies into the US banking network. Intercontinental Exchange (ICE), owner of the New York Stock Exchange, has invested in crypto exchange OKX, valuing it at $25 billion, while US President Donald Trump has publicly suggested that traditional banks should establish a viable relationship with the crypto industry.
Individually, any of these developments could have sparked a market rally during previous crypto cycles, when institutional adoption was seen as the catalyst that would propel crypto into a massive bull run. Instead, now that adoption is here, the market is ignoring it as macroeconomic forces have taken over.
Why liquidation
The sell-off was primarily triggered by the strengthening of the US dollar as the conflict in Iran intensified, after US President Donald Trump apparently quashed any chance of some sort of negotiated settlement with Iran, declaring: “There will be no deal with Iran.”
This led to a surge in oil prices, renewed inflation fears and shifting expectations for interest rates (despite jobs data showing a weakening market), putting pressure on risk assets globally. Stocks fell as the dollar index rose, and cryptocurrencies – which increasingly trade alongside tech stocks (read: risky assets) – followed.
As if that wasn’t enough, cracks in the global private credit market have spread to Wall Street giant BlackRock, which has reportedly begun limiting withdrawals from its $26 billion private credit fund in the face of increasing redemption requests. After similar tensions at Blue Owl, which sold $1.4 billion in loans last month to meet withdrawals, the events began to shake investors.
Reality check
So what does this week’s episode mean? A growing reality in crypto markets: macro matters more than crypto-native news.
In recent years, bitcoin has become more closely correlated to Nasdaq and other risky assets as institutional investors have entered the market. Hedge funds, asset managers and ETF feeds increasingly view bitcoin as part of a broader portfolio of macro-sensitive assets, reacting to liquidity conditions, interest rates and dollar strength.
Ironically, the same institutional adoption that many in the industry have long sought could be contributing to this dynamic.
As bitcoin becomes more integrated into traditional financial portfolios, its price is increasingly influenced by the same forces that move stocks, commodities, and currencies. When the dollar rebounds or interest rate expectations rise, liquidity tightens in the markets – and crypto is rarely immune.
This is not to say that the constant pace of institutional change is irrelevant. The expansion of custody services, banking access, and stock market investments indicates that a deeper, more mature crypto market structure is forming beneath the surface.
Who sells?
When such contradictory price movements hit the markets, investors ask themselves: who is selling?
The macroeconomic risk appears to have scared off mainly short-term Bitcoin holders, who cashed out when Bitcoin hit $74,000.
These short-term holders moved more than 27,000 BTC ($1.8 billion) to exchanges at a profit in the last 24 hours – one of the biggest spikes in recent months, according to CryptoQuant analyst Darkfost.
Short-term holders are generally the most reactive group in the market, and their selling reflects continued caution amid the ongoing war in Iran and other macroeconomic uncertainties. These holders act more like traders, moving in and out of an asset to make quick profits, rather than investors who want to buy and hold for the long term. And with bitcoin’s low liquidity, these movements impact price action.
And the data shows it.
The only short-term investors currently making profits are those who accumulated bitcoin a week to a month ago, at a realized price of around $68,000, suggesting that some recent buyers above that price are choosing to lock in their gains rather than expand their positions.
In the short term, with crypto in the midst of a bear market dating back to early October and with macroeconomic uncertainty, price is the only thing that matters to investors.
Silver lining
But all is not gloomy.
A recent report from Binance Research noted that U.S. spot Bitcoin ETFs saw approximately $787 million in net inflows last week – their first positive weekly flows since mid-January – suggesting that some institutional investors may be starting to re-engage with the market after several weeks of persistent outflows.
In fact, at a recent conference, giant university endowments, which tend to focus on long-term returns, said they had begun exploring other alternative investment ideas, including ETFs linked to digital assets, given the sky-high valuations of traditional stocks.
The report also points to signs that speculative excesses may already have been eliminated.
Bitcoin funding rates have fallen to their lowest levels since 2023, indicating that leveraged long positions have largely been unwound – conditions that historically create a cleaner basis for more sustainable rallies driven by spot demand rather than short-term speculation.
Ultimately, it all comes down to conviction and market movements.
Some traders called the strong rally earlier in the week a “bull trap” – a brief breakout that attracts late buyers before reversing lower. While institutional conviction is on the rise, with limited liquidity, a nervous market, macro-level headwinds, and a lack of clear catalysts, Bitcoin’s price action, at least this week, appears to have proven them right so far.
Read more: Bitcoin is stuck in a rut but JPMorgan says new legislation could be the ultimate spark
