Bitcoin struggled to maintain momentum around the $70,000 level on Monday, even as other assets rallied strongly to start the week. The cryptocurrency experienced a 1% decline around midday, trading at approximately $70,100 after recovering from a sharp drop to nearly $60,000 last Thursday. While stocks and precious metals mounted solid recoveries, bitcoin remained in low gear, raising questions among finance professionals about its persistent weakness.
The token’s inability to break through resistance levels has sparked debate about underlying structural issues affecting bitcoin price stability. According to market observers, the cryptocurrency faces multiple headwinds that could extend its current downturn beyond typical volatility patterns.
Institutional Adoption Remains Key Challenge for Bitcoin
Mohamed El-Erian, chief economic advisor at Allianz, told CNBC on Monday that bitcoin’s struggles will likely persist until the investor base fundamentally changes. He emphasized that slow institutional adoption remains the central theme affecting the cryptocurrency’s performance. According to El-Erian, bitcoin needs a larger base of long-term holders to absorb volatility and provide stability.
The economist distinguished between what he called “resident investors” and “tourist investors” in the bitcoin market. Tourist investors appear to be opportunistic traders with short-term perspectives who rapidly enter and exit positions at the first sign of volatility. This behavior pattern has compromised bitcoin’s stability as speculative traders rushed in and out of positions.
El-Erian explained that last year’s institutional adoption theme attracted significant speculation, which subsequently led to a shakeout. The largest example of institutional participation has been broad involvement from spot bitcoin ETFs that hold the token directly.
Three Factors Driving Current Bitcoin Weakness
Crypto bull Anthony Pompliano identified three specific reasons for the cryptocurrency’s current slump during a CNBC interview. First, he noted that investors tend to take profits when bitcoin soars above key psychological thresholds, creating selling pressure after the crypto decisively broke above $100,000 last year.
Additionally, increased financialization of bitcoin represents a significant catalyst for volatility. Pompliano pointed to the boom in complex trading strategies that allow investors to short, hedge, and increase speculation on bitcoin’s price movements. These sophisticated instruments challenge bitcoin’s traditional status as a buy-and-hold investment.
Meanwhile, Pompliano argued that markets are pricing in lower inflation expectations, which diminishes bitcoin’s appeal as “digital gold” and a hedge against rising prices. In contrast to bitcoin, gold continues receiving support from central bank purchases, providing a more stable foundation for the precious metal.
Bitcoin Price Outlook Tied to Inflation Expectations
According to Pompliano’s analysis, central banks purchasing gold are attempting to diversify away from all fiat currencies, not just the U.S. dollar. He suggested that bitcoin’s current pricing indicates the market believes inflation will not be a significant problem over the next two years. This expectation undermines one of the cryptocurrency’s primary value propositions as an inflation hedge.
However, the disconnect between bitcoin and traditional safe-haven assets like gold highlights uncertainty about the cryptocurrency’s role in investment portfolios. The bearish sentiment pressuring crypto markets reflects broader questions about bitcoin’s fundamental value drivers beyond speculative trading.
Market participants will be watching for signs of renewed institutional adoption or changes in inflation expectations that could shift bitcoin’s trajectory. Authorities have not confirmed any specific regulatory developments that might influence near-term price action, leaving the cryptocurrency’s recovery timeline uncertain.
