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Bitcoin continues to be under severe pressure as investor interest in global markets shifts towards artificial intelligence and technology stocks. The world’s largest cryptocurrency lost approximately 30% of its value in the first half of the year, and the weakening of the dollar, or “Sell America” as it’s known in the markets, further increased selling pressure on Bitcoin.
Bitcoin hit a record high of over $126,000 about a year ago, gaining approximately 350% in value during its two-year rally. This rise was driven by investors’ expectations that rising US government debt, inflationary pressures from tariffs, and political pressure on the Fed would weaken the dollar. However, this narrative has rapidly lost traction in recent weeks.
Jonathan Krinsky from BTIG noted that narratives often seem very convincing at peak market levels, adding, “Things can change quickly, as we saw in Bitcoin and software stocks last October, and in precious metals in January.”
This trend was quite effective for a time. Following Donald Trump’s election victory, the dollar index fell by 5.6 percent in a year, while gold reached a record high of $5,589 per ounce at the end of January. Bitcoin also hit historical highs during the same period. However, the current situation has now reversed.
Bitcoin fell below $60,000 this week for the first time since 2024, while the dollar index climbed to its highest levels in over 13 months. According to the latest data, Bitcoin was trading just below $59,230.
Ed Yardeni, president of Yardeni Research, stated that they were skeptical of the operation dubbed “Sell America” from the beginning. Yardeni said that the narrative of dollar depreciation lost momentum as concerns about tariffs eased and recession fears subsided. According to Yardeni, the credibility of this narrative was severely weakened when Federal Reserve Chairman Kevin Warsh prioritized price stability at his first policy meeting.
The Fed’s shift towards a more hawkish stance is creating significant headwinds for Bitcoin. Deutsche Bank research analyst Marion Laboure stated that a significant portion of the institutional investment thesis for Bitcoin throughout 2024 and 2025 was based on the upcoming interest rate reduction cycle, but the expectation of tightening has reversed this assumption.
Laboure stated that when the risk-free interest rate rises, the opportunity cost of holding a non-yielding asset increases, and in this environment, Bitcoin acts more like a liquidity-sensitive risk asset than a safe haven.
The picture also weakened in spot Bitcoin ETFs. The funds recorded outflows of approximately $6 billion for six consecutive weeks. This stands out as one of the largest outflow streaks in two years, while capital flows were seen to shift towards artificial intelligence and technology stocks during the same period.
Companies linked to Bitcoin are also facing increasing pressure. Strategy shares have fallen more than 70% in the last six months, dropping below $100 this week for the first time since 2024. Last month, the company made its first Bitcoin sale since 2022.
Strategy’s current market capitalization is $32.3 billion, while the value of its Bitcoin holdings is estimated at approximately $51 billion. However, the company’s average cost per Bitcoin is $75,651, which is about 20 percent higher than Bitcoin’s current price.
Bitcoin’s nearly 43% drop in the past year stands in stark contrast to the 158% rise in the PHLX Semiconductor Index during the same period. Chip stocks, driven by AI demand, have become a focus for investors, with Micron Technology’s better-than-expected earnings and strong demand forecasts for the next two years supporting this trend.
Although the technology-heavy Nasdaq Composite has fallen by about 4 percent in the last month, it is poised to finish the quarter up approximately 20 percent. The S&P 500 is expected to close the first half of the year up about 8 percent.
*This is not investment advice.