Bitcoin Faces Pressure Amid Rising Demand for Bonds and Gold

According to Cointelegraph, Bitcoin (BTC) struggled to maintain its bullish momentum as investors shifted towards government bonds following disappointing U.S. labor market data. This shift propelled gold to a record high, casting doubt on Bitcoin's ability to sustain its $108,000 level amid growing recession fears. While equities reacted positively, buoyed by expectations of a Federal Reserve interest rate cut, cryptocurrencies faced renewed pressure, with BTC briefly dipping below $110,000. Stocks tend to benefit more directly from lower financing costs and reduced household debt, which can stimulate consumption. The yield on the 2-year U.S. Treasury fell to 3.60%, its lowest in four months, indicating investors' preference for safety over returns. This surge in demand followed a report from ADP showing U.S. private payrolls added only 54,000 positions in August, a significant drop from July's 106,000. Additionally, the Institute for Supply Management reported a contraction in overall employment. Consensus around the upcoming Federal Open Market Committee meeting suggests a 0.25% rate cut, lowering the benchmark to 4.25%. However, investors remain skeptical about the Federal Reserve's ability to maintain such easing. The CME FedWatch tool indicates a decline in traders expecting January 2026 rates at 3.75% or lower, dropping to 65% from 72% a month ago. This tool uses Fed Funds futures prices to calculate implied probabilities ahead of the Fed’s January meeting. The U.S. Bureau of Labor Statistics report on Friday will be crucial in guiding risk asset positioning. Bitcoin's correlation with tech stocks remains high, with Nasdaq's 60-day correlation with Bitcoin at 72%, showing a strong movement alignment between the two assets. Analysts are uncertain about what might disrupt this pattern, though some point to the potential inclusion of Strategy (MSTR) in the S&P 500. Meryem Habibi, chief revenue officer at Bitpace, suggests this inclusion could legitimize an entire asset class, compelling index funds and ETFs tracking the S&P 500 to purchase MSTR shares. Despite increased demand for U.S. government bonds, fiscal imbalances could undermine confidence in the domestic currency, historically benefiting Bitcoin. Bank of America analysts reportedly predict the euro will strengthen against the U.S. dollar by 2026, citing trade frictions and weakening institutional credibility. In the short term, risk aversion may lead Bitcoin to retest the $108,000 mark. However, the growing demand for short-term Treasurys should not be seen as a long-term bearish signal. This article is for general information purposes and is not intended to be legal or investment advice. The views expressed are those of the author and do not necessarily reflect Cointelegraph's opinions.