Bitcoin is at the macro litmus test position. If it can stabilize and find a bottom under the pressure of stock market sell-offs, high yields, and a strong dollar, its narrative as a hedge against monetary disorder will be strengthened.

Written by: Blockchain Knight

The global financial market is under dual pressure, with sovereign bond yields hitting multi-year highs, while unexpectedly high inflation data has shattered interest rate cut expectations.

The U.S. April CPI rose by 3.8% year-on-year, exceeding market expectations; the subsequent PPI was even more shocking, soaring to 6.0% year-on-year, matching the highs of 2022, with core PPI also rising to 5.2%. Producer prices have risen across the board, directly transmitting to the cost side and compressing the space for policy easing.

As a result, the yields on 2-year and 10-year U.S. Treasuries rose to 3.98% and 4.47%, respectively, while the 30-year yield approached 5.03%. The dollar strengthened, U.S. stocks faced pressure, and risk assets experienced indiscriminate selling.

The warning bells in the bond market have already sounded. Long-term government bond yields in the U.S., UK, Germany, and Japan have all returned to the warning range of the financial crisis from 1998 to 2008.

Behind this is not only the stickiness of inflation but also a heavy burden of sovereign debt, with the IMF predicting that global public debt as a share of GDP will reach 100% by 2029.

In addition, the tensions in the Strait of Hormuz have driven up energy prices, with the World Bank warning that persistently high oil prices could weaken growth and push up inflation, making policy decisions exceptionally difficult.

Central banks must either defend inflation credibility or maintain financial stability, with much less maneuvering room than in 2008 or 2020.

Bitcoin is at the end of the transmission chain and is first to be affected. After the CPI data was released, Bitcoin managed to hold the $80,000 mark for a time, but the shock from the PPI became the last straw that broke the camel's back, and the price fell below the critical round number, briefly dipping below $79,000.

The $80,000 mark thus became a dividing line for bulls and bears. If it can quickly recover with U.S. stocks stabilizing and yields retreating, the downward trend may be seen as a liquidity washout; however, if it continues to trade below this price level, the failure of the rebound will confirm the dominance of sellers, and the $75,000 level will re-enter the bears' sights.

However, the crypto market is not without buffers, as several catalysts are battling against macro headwinds. The Senate Banking Committee will hold a review meeting on the CLEAR Act on May 14, with the probability of passage rising to about 70%, seen as the clearest legislative positive in recent times.

White House crypto advisors revealed that a significant announcement regarding strategic Bitcoin reserves will come in the next few weeks, although the actual purchasing power remains to be seen.

Additionally, spot Bitcoin ETFs have recorded net inflows for six consecutive weeks, accumulating over $3.5 billion, forming structural buying support.

If the panic following the PPI gradually dissipates, and the aforementioned catalysts are fulfilled as expected, Bitcoin may be able to rise back above the strong resistance area of $82,000.

Compared to the global financial crisis in 2008, banks and household balance sheets are more resilient, and debt pressures are released through refinancing rather than a sudden rupture.

Bitcoin is at the macro litmus test position. If it can stabilize and find a bottom under the pressure of stock market sell-offs, high yields, and a strong dollar, its narrative as a hedge against monetary disorder will be strengthened.

Conversely, if it continues to follow risk assets downward, the market will still view it as a high-beta speculative asset.