It appears that bitcoin is unable to recover.
Bitcoin (BTCUSD) dropped another 7% this week after falling below the $90,000 mark last week, reaching an intraday low of $81,065 overnight. This happened amid a backdrop of heightened volatility across several asset classes, showing that investors have been feeling risk-averse in recent weeks – and risk-averse investors don’t want to park their money in bitcoin.
That may have investors wondering what it would take to lift bitcoin out of this rut. Bitcoin was trading at its lowest level since the November 2025 fall, and may risk dipping below $80,000 for the first time since April 2025’s tariff-related selloff, according to Dow Jones Market Data.
It may boil down to two factors: more risk-tolerant investors and a more relaxed global monetary policy.According to Linh Tran, a senior market analyst at XS.com, “in my opinion, bitcoin’s ongoing weakness and its consolidation around the 84,000 USD area do not stem from any deterioration in bitcoin’s underlying fundamentals.”Rather, short-term changes in the global monetary environment and general risk appetite are the main causes of this move.
The relationship between risk appetite and bitcoin is clear. Crypto is often a volatile asset, and bitcoin often moves similarly to high-beta growth equities. Investors’ risk tolerance has been declining this month. They have been rotating out of IT stocks and have been diversifying into other sections of the market. On top of that, investors have been investing into metals, which has prompted gold, silver and copper to climb.
Tran added that bitcoin faces direct competition from these metals. She noted that geopolitical tensions and policy uncertainty this month – whether that’s the military operation in Venezuela, tariff threats over control of Greenland, President Donald Trump’s tone at Davos, escalating tensions in Iran and so on – have been driving investors to more traditional defensive assets. While bitcoin believers trust in the crypto as a store of value, recent market moves show that the larger investor demography isn’t buying it. “The fact that gold and other precious metals continue to gain from policy and geopolitical uncertainty, while bitcoin does not, implies that investor risk appetite is currently geared more toward defense than risk-seeking,” Tran told BourseWatch.
A new Fed chair may not change things for bitcoin
Beyond investor confidence, the second piece of the equation is monetary policy. According to Tran, bitcoin is “a liquidity-sensitive” asset, meaning that when central banks lower interest rates and increase the amount of money flowing into the world economy, it gains.Isolated rate reductions, in my opinion, can assist bitcoin in entering a re-accumulation phase, but they are insufficient to transition the cryptocurrency into a permanent recovery phase,” she stated.
A number of central banks are currently adopting a more “hawkish” monetary policy stance. The Federal Reserve kept rates unchanged this week, the Bank of Japan has been rising rates, and Europe is seeing quantitative tightening.
In the U.S., there’s concern that the Fed may adjust its tone to favor additional rate reduction in the future. Trump has been open about urging the Fed to decrease rates, and on Friday, he nominated Kevin Warsh as his nomination to be the new Fed chair after Jerome Powell’s tenure ends in May.
In terms of monetary policy, Warsh has a mixed record. In the past, he’s backed rate hikes, but Trump wouldn’t have appointed him if he anticipated Warsh to keep rates high.
When it comes to crypto, Warsh has said he regards bitcoin as a sustainable store of value, and he’s even invested in crypto firms. However, this does not imply that he will change monetary policy to support cryptocurrency.
However, it will take more institutional adoption of bitcoin in addition to monetary policy easing to drive the price of the cryptocurrency higher, even if Warsh pressures the Fed to lower rates when he arrives in May.Put differently, while lower interest rates might help bitcoin’s rebalancing efforts, Tran stated that incremental buying pressure is unlikely to be sufficient to produce a significant rebound if macroeconomic uncertainty continues and exchange-traded fund flows do not continue to be largely positive.
