Amid rising volatility and recent plunges in Bitcoin's value, the timing of the next accumulation phase may be influenced by current credit market stress, according to recent data. On Tuesday, Bitcoin’s price dipped below $73,000, highlighting the challenges posed by unstable US economic conditions. Tension is mounting in the credit markets, even as US debt and borrowing expenses remain high, potentially impacting Bitcoin's trajectory in the months ahead.
Key Insights:
- The ICE BofA US Corporate Option-Adjusted Spread is currently at 0.75, the lowest it has been since 1998.
- US national debt has climbed to $38.5 trillion, while the 10-year Treasury yield stands at 4.28%.
- Although Bitcoin whale inflows to exchanges have increased, the rate of on-chain profit-taking shows signs of slowing down.
The ICE BofA Corporate Option-Adjusted Spread serves as a crucial indicator of macroeconomic health. This metric assesses the additional yield that investors require for holding corporate bonds over US Treasuries. Typically, wider spreads indicate stress in credit markets. Presently, these spreads are compressed, which suggests an underestimation of risk amid current economic pressures. With US debt at $38.5 trillion and the 10-year Treasury yield rebounding to 4.28%, financial conditions remain stringent.
Historically, Bitcoin has reached local bottoms several months after credit spreads start to widen, as observed in 2018, 2020, and 2022. Joao Wedson, founder of Alphractal, anticipates that if liquidity continues to tighten and credit spreads increase, Bitcoin could enter an accumulation phase before broader market stress becomes apparent.
In recent days, short-term Bitcoin selling has surged. Crypto analyst Amr Taha reports significant Bitcoin transfers to Binance by both whales and mid-term holders. Notably, wallets with over 1,000 BTC moved about 5,000 BTC on Monday, paralleling a similar movement seen last December. Additionally, holders from the six- to 12-month age group transferred another 5,000 BTC, marking the most substantial inflow from this demographic since early 2024.
Despite this, overall selling pressure is diminishing. Data from CryptoQuant indicates a drop in the spent output profit ratio (SOPR) toward 1, the lowest in a year, as Bitcoin touched a year-to-date low of $73,900 on Tuesday. Historical trends suggest Bitcoin bottoms typically occur three to six months after credit spreads begin to widen. Rising Treasury yields may further strain credit markets, potentially pushing spreads to the 1.5%–2% range by April, opening a possible accumulation period past July 2026 and into the year's second half, as long-term seller fatigue sets in.