Bitcoin’s recent recovery was interrupted as it dropped below $66,000 on Friday, reflecting a broader trend of declining risk appetite among investors. This downturn coincided with a notable drop in U.S. equity markets and rising concerns over macroeconomic factors.
The cryptocurrency, which had surged to approximately $68,000 earlier in the week, fell by 3% to around $65,600 in the early U.S. trading session. The CoinDesk 20 Index, which tracks a variety of cryptocurrencies, also experienced a decline of 2.3% over the past 24 hours, with major coins like ether (ETH), XRP, and solana (SOL) registering similar losses.
Stocks associated with the cryptocurrency sector mirrored this downward trend. MicroStrategy (MSTR), known for its significant Bitcoin holdings, saw a decline of 3%, while Coinbase (COIN) fell by over 2%. Circle (CRCL), a stablecoin issuer, experienced a nearly 5% drop, reversing a recent rebound that had seen its stock rise by nearly 50% in just a few sessions.
Miners, whose fortunes are increasingly tied to developments in artificial intelligence infrastructure, faced even steeper losses. Companies such as IREN, Cipher Mining (CIFR), Core Scientific (CORZ), and TeraWulf (WULF) reported declines ranging from 6% to 8%.
This market activity unfolded against a backdrop of declining U.S. equity indexes, with the Nasdaq down 0.8% and the S&P 500 decreasing by 0.6%. Investors are grappling with a mix of economic uncertainties, including a higher-than-expected Producer Price Index (PPI) inflation reading, which has raised concerns about the trajectory of inflation.
The core PPI, which excludes food and energy prices, increased by 3.6% year-over-year in January, surpassing the anticipated 3.0% and rising from 3.3% in the previous month. As a result, markets are now pricing in a 96% likelihood that the Federal Reserve will not implement a rate cut during its upcoming meeting on March 18.
Additionally, worries about credit market stress have intensified, with credit spreads reaching their widest levels in four months. Notable private equity firms, including KKR, Ares, and Apollo Global Management, saw their stock prices drop by 6% to 7%, hitting new lows.
Geopolitical tensions are also contributing to market unease, particularly regarding potential U.S. military action against Iran. The U.S. has begun evacuating embassy staff from Israel, leading to increased speculation about possible strikes.
In response to these pressures, investors are shifting their focus toward safer assets. The yield on the U.S. 10-year Treasury note has dipped below 4% for the first time since November 2024. Precious metals are experiencing a rally, with gold prices rising by 1% to over $5,230 per ounce, while silver surged by 4% to trade above $92. Crude oil prices also increased by 2.3%, surpassing $67 per barrel.
Market positioning in futures and options indicates that traders are preparing for further declines in risk assets. Despite the downturn in Bitcoin and other cryptocurrencies, some AI-related tokens, such as Internet Computer, Render, and Bittensor, have gained traction, buoyed by recent positive earnings reports from companies like Nvidia.
Bitcoin's recent rebound has been halted as macroeconomic concerns and geopolitical tensions lead to a decline in both cryptocurrency and U.S. stock markets. The drop in Bitcoin and related assets reflects a broader investor retreat from riskier investments amid rising inflation and credit market stress.