Key takeaways:
Rising demand for government bonds and gold underscores recession fears, limiting Bitcoin’s ability to sustain bullish momentum.
Correlation with equities remains high, but structural catalysts like Strategy’s S&P 500 inclusion could shift sentiment.
Bitcoin (BTC) failed to hold onto its bullish momentum on Thursday as traders fled toward the safety of government bonds after weaker-than-expected United States labor market data. This move drove gold to an all-time high and raised doubts over Bitcoin’s $108,000 level, with recession fears increasingly dominating investor sentiment.
Equities, however, responded positively. Market participants grew more confident that the US Federal Reserve would lower interest rates. In contrast, cryptocurrencies faced renewed pressure as BTC briefly traded under $110,000. Unlike digital assets, stocks benefit more directly from lower financing costs and reduced household debt burdens, both of which can stimulate consumption.
Yields on the 2-year US Treasury dropped to 3.60%, their lowest level in four months, signaling investors’ willingness to accept lower returns in exchange for safety. The surge in demand followed ADP’s Thursday report showing US private payrolls added 54,000 positions in August, a sharp decline from July’s 106,000. The Institute for Supply Management (ISM) also reported that overall employment contracted.
Consensus around the Sept. 16-17 Federal Open Market Committee (FOMC) meeting points to a 0.25% rate cut, bringing the benchmark down to 4.25%. Still, investors remain skeptical that the Federal Reserve can sustain such easing for long.
The CME FedWatch tool shows that traders expecting January 2026 rates at 3.75% or lower declined to 65% from 72% a month ago. This gauge uses Fed Funds futures prices to calculate implied probabilities ahead of the Fed’s Jan. 28 meeting. Friday’s US Bureau of Labor Statistics report will be crucial in guiding positioning across risk assets.
Bitcoin remains highly correlated to tech stocks
An eventual rise in inflationary pressure from lower capital costs could undermine economic growth, particularly with higher import tariffs in place. So, while lower interest rates may offer short-term relief, strong demand for gold and short-term bonds highlights persistent risk aversion, which could weigh heavily on cryptocurrencies. Nasdaq’s 60-day correlation with Bitcoin sits at 72%, showing the two assets have largely moved together.
What might break this pattern remains uncertain, but some analysts highlight the potential addition of Strategy (MSTR) to the S&P 500. According to Meryem Habibi, chief revenue officer at Bitpace, the inclusion “cements the legitimacy of an entire asset class.” Such a move would force index funds and exchange-traded funds (ETFs) tracking the S&P 500 to purchase MSTR shares.
Related: Peter Thiel vs. Michael Saylor: Who’s making the smarter crypto treasury bet?
Even with elevated demand for US government bonds, fiscal imbalances could erode confidence in the domestic currency, a scenario historically favorable for Bitcoin. Bank of America analysts reportedly project the euro will strengthen against the US dollar by 2026, citing trade frictions and weakening institutional credibility.
In the short term, risk aversion may push Bitcoin to retest the $108,000 mark. However, the growing demand for short-term Treasurys alone should not be viewed as a long-term bearish signal.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
