Bitcoin (BTC) is currently holding below the key $70,000 level. Yet a new report from data and research firm Ecoinometrics suggests the market may not be building a foundation for recovery.
Instead, the firm says the cryptocurrency remains vulnerable to another downward move, driven by three overlapping forces: weakening equity momentum, structural changes in Bitcoin’s volatility profile, and a stable but unsupportive Federal Reserve (Fed).
Structural headwinds for Bitcoin
According to the reportBitcoin is no longer traded in isolation. It is increasingly linked to stock markets, capital flows and broader macroeconomic conditions. For the moment, this link does not work in its favor.
Bitcoin is already showing signs of weakness, stock markets are losing steam, and the Federal Reserve maintains a neutral stance that offers little additional liquidity support. Together, these factors keep downside risks elevated.
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Although Bitcoin has attempted to stabilize in recent weeks, Ecoinometrics cautions that this does not look like a clear bottoming trend. This looks more like a pause in an ongoing bearish phase.
Structural headwinds are already in place, as the company points out, including continued Bitcoin outflows. exchange traded funds (ETF) and a broader environment of risk aversion in financial markets.
The report notes that Bitcoin is trading below its long-term trend, with its 200-day moving average (currently above $100,000) falling and rebounds repeatedly failing below this level – a classic sign of a bearish structure.
In contrast, the Nasdaq 100 has been at a standstill for about three months, but its 200-day moving average continues to rise. This suggests that stocks are slowing but have not yet entered a confirmed structural slowdown.
The distinction is important. When Bitcoin weakens on its own, declines can occur gradually. However, history shows that when actions turn around decisively, Bitcoin tends to fall sharply alongside them.
Lower volatility, higher correlation
Beyond price action, the company highlights a deeper structural change in Bitcoin’s behavior: a marked compression in volatility. In previous cycles, 12-month realized volatility increased dramatically, both during bull markets and subsequent crashes.
This time, even after a full bear-bull-bear sequence since 2022, volatility has not returned to these previous extremes. In fact, the peak volatility of the current cycle has been significantly lower.
This change reflects that is driving demand. ETF flows now play a dominant role in shaping trends. These flows are generally larger, more regular and more systematic than the retail-driven surges that characterized previous cycles.
In other words, Bitcoin is now integrated into institutional portfolios, often alongside technology and growth stocks. This change has benefits including lower volatility and more predictable flow patterns. This could also strengthen the long-term sustainability of Bitcoin.
However, this comes with a trade-off: greater sensitivity to stock market declines. Ecoinometrics states that, as BTC becomes more integrated into the broader risk appetite complex, it behaves more like a component of that system rather than a detached speculative asset.
Downside risks increase
On the policy side, Ecoinometrics suggests that the Fed’s posture remains largely unchanged: inflation has improved but is not fully under control and the labor market remains resilient.
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As a result, rate cuts are not urgent and rate hikes are not imminent. The communications index is well below the peak tightening seen in 2022 and well above the dovish crisis level of 2020, putting current policy halfway there.
For Bitcoin, this tough stance eliminates the risk of a sudden political shock, but it does not provide a tailwind. The company said that in a fragile market, stability might be preferable to tightening, but would offer little support if risky assets began to fall.
Featured image from OpenArt, chart from TradingView.com
