Bitcoin (BTC) recently rose above $37,000 between November 10 and 12, only to falter and suffer a correction towards $35,000 on November 13.

This abrupt move triggered the liquidation of long futures contracts worth $121 million, and although the price of Bitcoin stabilized around $35,800 on November 14, investors are left pondering the underlying factors behind this slowdown.

US inflation and the impact of the government shutdown on the price of BTC

Part of the catalyst behind this move was the unexpected softening of US inflation data on November 14. The US consumer price index (CPI) showed a 3.2% increase in October compared to 2022, leading to a drop in US short-term bond yields. term treasury bonds.

This triggered buying activity in traditional assets, which could reduce demand for alternative hedging instruments like Bitcoin. If the Federal Reserve’s strategy to successfully curb inflation without causing a recession is successful, Bitcoin may lose some of its appeal as a hedge.

Even rating agency Moody’s, which lowered its outlook on U.S. credit to negative from stable on Nov. 11, did not tilt favorably toward Bitcoin and other alternative hedges. Instead, investors sought refuge in short-term fixed income instruments at 5.25%, explaining why gold struggled to break above $2,000 despite rising debt levels and global economic challenges.

In China, retail sales data for October indicated a 7.6% increase, the fastest since May. However, this apparent recovery hides underlying problems, in particular a 9.3% drop in investments in the real estate sector in the first 10 months of the year. China’s economic stimulus measures, including policy support and liquidity injections, have produced only modest benefits.

Given that China is the world’s second-largest economy, its economic situation could contribute to investors’ cautious stance on riskier assets like Bitcoin, particularly when viewed within the broader global economic context. Additionally, recent political developments surrounding US government shutdown threats could also influence Bitcoin’s performance.

The U.S. House of Representatives passed a bill on Nov. 14 to keep the government operational during the holiday season, temporarily averting a fiscal crisis. However, this measure sets the stage for potential disputes over spending in the coming year, including a provision to cut federal spending by 1% across the board in 2024 if a deal is not reached.

Spot Bitcoin ETF Expectations and Regulatory Scrutiny

The cryptocurrency market experienced a backlash to a fraudulent filing of a BlackRock XRP trust on November 13. Although it initially raised hopes of an XRP (XRP) spot exchange-traded fund (ETF) in the US, the $9 trillion asset manager quickly dismissed the claim.

While this event is not directly related to Bitcoin, it has attracted regulatory scrutiny of the crypto sector at a sensitive time when numerous Bitcoin ETF applications await review by the US Securities and Exchange Commission (SEC). ). Consequently, regardless of the parties involved, the result represents a net benefit for the cryptocurrency market.

Related: Tether Attributes Increased USDT Growth to ETF Enthusiasm and Emerging Markets

On November 13, Bloomberg ETF analyst James Seyffart emphasized that approval of a spot Bitcoin ETF should not be expected before January. This statement came amid heightened market anticipation surrounding upcoming SEC decisions scheduled for November 17-21.

Increased fear of a global economic recession

In essence, Bitcoin’s price drop after flirting with the $37,000 level cannot be attributed to a single event. Investors may have reevaluated their positions, considering Bitcoin’s substantial market capitalization of $725 billion. By comparison, Berkshire Hathaway, a major conglomerate, has a valuation of $760 billion and posted profits of $76.7 billion last year.

Bitcoin’s strict monetary policy ensures scarcity and predictability, but large global corporations can buy back their own shares using the profits, effectively reducing the available supply. Additionally, during economic downturns, these trillion-dollar companies can leverage their strong balance sheets to acquire competitors or expand their market dominance.

Ultimately, Bitcoin’s challenge to maintain momentum above $37,000 is influenced by factors such as data supporting the Federal Reserve’s strategy for an economic soft landing and concerns about global economic growth. These elements continue to create an unfavorable outlook for Bitcoin value, especially if the SEC delays decisions on BTC spot ETFs, aligning with market expectations.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.