Bitcoin Faces Crucial Test at $70,000 as Traders Grow Cautious

Bitcoin Plunges to Six-Week Low Amid Global Economic Worries and ETF Outflows

The cryptocurrency market has come under intense pressure, with Bitcoin falling to its lowest level in over six weeks. The digital currency dropped as much as 3.3% to $72,643 in Singapore on Thursday, its weakest point since April 13. This decline is a result of investor sentiment being hit by concerns over the ongoing US-Iran conflict, which could lead to higher inflation and interest rates.

The US spot Bitcoin exchange-traded funds (ETFs) have seen about $1.5 billion in net outflows so far in May, adding to the selling pressure. Furthermore, the lack of progress on key U.S. crypto legislation, including the Digital Asset PARITY Act and the CLARITY Act, has kept investors cautious. According to Akshat Siddhant, Lead quant analyst at Mudrex, the broader sentiment remains weak due to these factors.

Bitcoin's Weakness is Macro-Driven, Not Crypto-Specific

Read also: Bitcoin Price Sinks 6% Below $66,500 Amid ETF Outflows and Institutional Selling

Experts believe that Bitcoin's weakness is primarily driven by macroeconomic factors, rather than specific issues within the cryptocurrency market. Higher US yields and a firmer dollar have tightened financial conditions, while ETF withdrawals and reports of a large block sale of the iShares Bitcoin Trust have dented sentiment. Sean McNulty, Asia-Pacific derivatives trading lead at FalconX, notes that this is a macro-driven issue, rather than a problem specific to Bitcoin.

Traders Turn Cautious Amid Macro Jitters

Traders are becoming increasingly cautious as they wait for clearer developments in the Middle East. IG Markets analyst Tony Sycamore notes that Bitcoin is feeling the pinch as leveraged long positions get trimmed on the break of key support levels in the mid $70,000's. A sustained move above $75,000 could help stabilize the price in the short term, according to Akshat Siddhant. However, near-term risks remain tilted to the downside, with analysts warning that Bitcoin needs to hold the $70,000 level to avoid further downside.