Bitcoin briefly pushed towards $74,000 this week, supported by a series of bullish developments that have tied the crypto industry ever closer to traditional finance.
Some market observers began calling this a bullish rally, with one analyst even saying the new run ‘has legs’.
Still, the convention did not last. By the end of the week, the largest cryptocurrency had fallen back below $69,000, losing $110 billion in market capitalization.
The pullback came despite what might otherwise have been considered one of the most positive stretches of institutional news for the sector in months.
Morgan Stanley appointed Bank of New York Mellon as custodian for its spot bitcoin ETF exposure, adding another layer of Wall Street infrastructure around the asset class. Crypto exchange Kraken gained access to the Federal Reserve’s payment system, a milestone in the integration of crypto firms with the US banking network. Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, invested in the crypto exchange OKX, valuing it at $25 billion, while US President Donald Trump publicly suggested that traditional banks should create a workable relationship with the crypto industry.
Individually, any of these developments could have sparked a market rally in previous crypto cycles, where institutional adoption was seen as the catalyst that would send crypto into a massive bull run. Instead, the market is ignoring it now that adoption is here as macro forces have taken over.
Why the sale
The sell-off was mainly triggered by a strengthening of the US dollar as the conflict in Iran intensified after US President Donald Trump appeared to scupper any chance of some sort of negotiated settlement with Iran, saying: “There will be no deal with Iran.”
This spurred a rise in oil prices, renewed inflation concerns and shifting expectations around interest rates (despite jobs data showing a weakened market), putting pressure on risk assets globally. Stocks moved to the downside as the dollar index rose, and crypto — which has increasingly traded alongside tech stocks (read: risk assets) — followed suit.
If that’s not enough, cracks in the global private credit market extended to Wall Street giant BlackRock, which reportedly began limiting withdrawals from its $26 billion private credit fund amid rising redemption requests. After similar stress at Blue Owl, which sold $1.4 billion in loans last month to accommodate withdrawals, events began to rattle investors.
Reality check
So what does this week’s episode mean? A growing reality in crypto markets: macro matters more than crypto-native news.
Over the past several years, bitcoin has become more closely correlated with the Nasdaq and other risk assets as institutional investors entered the market. Hedge funds, asset managers and ETF streams are increasingly treating bitcoin as part of a broader portfolio of macro-sensitive assets that react to liquidity conditions, interest rates and dollar strength.
Ironically, the same institutional adoption that many in the industry have long sought may contribute to this dynamic.
As bitcoin becomes embedded in traditional financial portfolios, its price is increasingly influenced by the same forces that move stocks, commodities and currencies. When the dollar rises or interest rate expectations rise, liquidity tightens across markets – and crypto is rarely immune.
This does not mean that the constant drumbeat of institutional development is irrelevant. The expansion of custody services, banking access and exchange investment points to a deeper, more mature crypto market structure forming beneath the surface.
Who sells?
One question investors ask when such contradictory price action hits the markets is: Who is selling?
The macro risk seemed to have spooked short-term bitcoin holders the most, who cashed out when bitcoin hit $74,000.
These short-term holders have transferred more than 27,000 BTC ($1.8 billion) to exchanges in profit over the past 24 hours — one of the biggest increases in recent months, according to CryptoQuant analyst Darkfost.
Short-term holders are typically the most reactive group in the market, and their selling reflects continued caution amid the ongoing war in Iran and other macro uncertainties. These holders behave more like traders who move in and out of an asset to make a quick profit, rather than investors who want to buy and hold for the long term. And with bitcoin’s thin liquidity, these moves make a dent in price action
And the data shows it.
The only short-term investors currently in profit are those who accumulated bitcoin between a week and a month ago, at a realized price of around $68,000, suggesting that some recent buyers above this price are choosing to lock in gains rather than extend their positions.
In the short term, with crypto in the midst of a bear market dating back to early October and macro uncertainty, price is the only thing that matters to investors.
Silver lining
But it’s not all doom and gloom.
A recent report from Binance Research noted that US spot bitcoin ETFs recorded around $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-enter the market after several weeks of sustained outflows.
Indeed, giant university endowments, which tend to focus on long-term returns, said at a recent conference that they have begun to explore other alternative investment ideas, including digital asset-related ETFs, given the skyrocketing valuations of traditional stocks.
The report also pointed to signs that speculative profits may have already been flushed out.
Bitcoin funding rates have fallen to their lowest levels since 2023, indicating that leveraged long positions have largely been liquidated — conditions that historically create a cleaner basis for more durable rallies driven by spot demand rather than short-term speculation.
In the end, it’s all about conviction and market movements.
Some traders called the sharp rally earlier this week a “bull trap” — a brief burst that lures late buyers in before returning. While institutional conviction is rising, with thin liquidity, a lopsided market, macro headwinds and a lack of clear catalysts, bitcoin’s price action, at least this week, seems to have proved them right so far.
Read more: Bitcoin stuck in a rut, but JPMorgan says new legislation could be the ultimate spark
