Macro analyst Capital Flows has identified Bitcoin‘s BTC/USD increasing correlation with traditional risk assets, particularly low-quality banks in the Russell index, as key to understanding its price trajectory in the current market environment.

What Happened: “Bitcoin is having a greater convergence with traditional risk asset flows but remains at the far end of the risk curve,” Capital Flows stated in a thread on X on Friday, noting that capital must move outward from less risky assets to reach Bitcoin.

This positioning explains why Bitcoin has been “moving lockstep with all of the lowest quality banks in the Russell” – both are highly sensitive to changes in macro liquidity conditions.

The analyst characterized the current macro backdrop as “neutral,” with interest rates having “come down marginally” but the carry trade continuing to create risk for assets while “the quantity of money in the system isn’t expanding like it used to.”

Cross-currency basis swaps show no signs of a “massive injection of macro liquidity,” and year-to-date ETF flows remain “only marginally positive.”

For Bitcoin to reach the $100,000 range, Capital Flows emphasized the need for a “durable change in macro liquidity which isn’t taking place right now.”

Without such a shift, another equity market decline could push Bitcoin down to the “$72-75,000 range” as implied volatility premiums increase.

The analyst highlighted Strategy‘s MSTR continued Bitcoin purchases as a positive factor, describing the company as “continuing to hit the bid and take on more risk to buy massive amounts of Bitcoin.”

Both Strategy and Coinbase COIN currently show an “implied volatility discount” after the recent market bounce, suggesting “upside is likely limited” from a positioning perspective.

Also Read: Bitcoin Tumbles Below $85,000: Is The Bull Run Over?

What’s Next: Despite these short-term concerns, Capital Flows noted Bitcoin’s current 22% drawdown from all-time highs is “nowhere near as bad as it could be compared to historical parallels,” reflecting Bitcoin’s gradual integration “into the legacy financial system as a digital gold type of asset.”

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