Prior to the release of U.S. inflation data, market expectations for persistently high interest rates intensified, putting downward pressure on risk assets overall. Bitcoin, which had previously rebounded from its lows, saw this recovery quickly lose momentum, while gold also declined, indicating that capital is reassessing the appeal of non-yielding assets.
Bitcoin and gold are weakening in tandem.
According to CoinDesk data, Bitcoin closed at $61,233 on Wednesday, down 3% over the past 24 hours and 6.9% over the past week. Gold fell 2%, dropping below $4,200 per ounce.
Major cryptocurrencies also declined broadly. Ethereum fell 3.4% to $1,625, Solana dropped 4.1% to $64.24, XRP declined 4.3% to $1.12, while BNB and Dogecoin each fell less than 3%. HYPE slid 10.2% on the day, with its weekly loss expanding to 21.3%, making it the weakest performer among major tokens.
Inflation data becomes the short-term focus
The market is currently focused on the U.S. inflation data to be released on Wednesday. If the data exceeds expectations, it could reinforce the Fed’s assessment that interest rates will need to remain high for longer, further pressuring assets that rely on liquidity.
Beyond the crypto market, Asian equities also weakened significantly. The South Korean Kospi index plunged 6.3%, the MSCI Asia Pacific Index fell 2.5%, and Nasdaq 100 futures retreated 0.8%. Meanwhile, the U.S. 10-year Treasury yield rose to 4.54%, and Brent crude oil held near $92 per barrel.
The rebound is largely driven by short covering.
The report noted that Bitcoin's rebound from its low was more driven by short covering than by new spot buying. By Monday, over $500 million in short positions had been closed, reaching the highest level since April.
Diana Pires, Chief Business Officer of sFOX, stated that while there was indeed buying support after the price decline, spot demand has not yet shown a clear recovery. She noted that ongoing outflows from U.S. spot Bitcoin ETFs have kept institutional capital cautious. When new demand is insufficient to offset selling pressure, rallies often struggle to sustain.
Next, the market will watch to see if Bitcoin can hold onto buying pressure after the inflation data release. If gold stabilizes while Bitcoin continues to decline, its narrative as a macro hedge could face further pressure.