Market Spotlight:
Bitcoin’s start to 2026 initially showed promise, briefly reclaiming the $93,000 level and signaling a recovery from late last year. However, this momentum was cut short as the week progressed. Despite Friday’s softer-than-expected US payrolls data, which showed only 50,000 jobs added versus the 73,000 forecast, the market showed no distinct bullish reaction. It seems that right now, traditional economic data is taking a backseat to a sudden spike in global risk aversion.
Geopolitical instability has emerged as the primary headwind for digital assets this week. The uncertainty surrounding the US intervention in Venezuela and the capture of Nicolas Maduro, combined with escalating diplomatic tensions between China and Japan over Taiwan, has forced traders into a defensive, "risk-off" stance. These geopolitical ructions are weighing heavily on sentiment, overshadowing what might otherwise be interpreted as a supportive macroeconomic backdrop where the US unemployment rate actually edged lower to 4.4%.
This shift in sentiment was starkly reflected in institutional behavior. After starting the year with strong inflows (including a single-day inflow of $825M), we saw a sharp reversal, with over $1 billion exiting spot Bitcoin ETFs in just three days. Recent selling has also been linked to fears of a potential supply glut originating from Venezuela. While there’s little evidence on-chain to validate the scale of these rumored holdings, the market chose to price in the risk immediately, leading to the sudden shift in flows.
On the monetary policy front, the picture is becoming more complex. While the job market is cooling, the economy remains on firm footing, reducing the urgency for the Federal Reserve to cut rates immediately. Markets are now pricing in a pause, with the next cut potentially not expected until June. We are currently in a consolidation phase where investors are digesting this mix of firm economic data, geopolitical shocks, and the resultant volatility in ETF flows.
Looking Ahead:
For the week ahead, the focus shifts to the CPI release, where any signs of persistent inflation would likely solidify expectations that the Fed will hold rates steady until June. We are also closely monitoring the World Economic Forum for the potential nomination of the next Fed Chair, a decision that could trigger significant market repricing. While upcoming changes to labor data methodology may introduce statistical noise and artificially weak numbers, we view the current market pullback as temporary. The broader 2026 outlook remains fundamentally positive, driven by improving liquidity dynamics that support a path of continued price appreciation.
