Bitcoin briefly pushed toward $74,000 this week, buoyed by a string of bullish developments that have tied the crypto industry ever closer to traditional finance.

Some market observers began calling this a bullish rally, with one analyst even saying that the new run ‘has legs.’

Yet the rally didn’t last. By the end of the week, the largest cryptocurrency had slipped back below $69,000, losing $110 billion in market cap.

The pullback came despite what might otherwise have been considered one of the most positive stretches of institutional news for the sector in months.

Morgan Stanley named Bank of New York Mellon as a custodian for its spot bitcoin ETF exposure, adding another layer of Wall Street infrastructure around the asset class. Crypto exchange Kraken gained access to the Federal Reserve’s payment system, a milestone in integrating crypto firms with the U.S. banking network. Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, invested in crypto exchange OKX, valuing it at $25 billion, while U.S. President Donald Trump publicly suggested traditional banks should strike a workable relationship with the crypto industry.

Individually, any one of these developments might have sparked a market rally in earlier crypto cycles, when institutional adoption was seen as the catalyst that would send crypto into a massive bull run. Instead, now that adoption is here, the market is ignoring it as macro forces have taken over.

Why the selloff

The selloff was mainly triggered by U.S. dollar strengthening as the conflict in Iran intensified, after U.S. President Donald Trump seemingly quashed any chance of some sort of negotiated settlement with Iran, saying, “There will be no deal with Iran.”

This spurred a spike in oil prices, new inflation concerns and shifting expectations around interest rates (despite jobs data showing a weakening market), which put pressure on risk assets globally. Equities moved to the downside as the dollar index rose, and crypto — which has increasingly traded alongside technology stocks (read: risk assets) — followed.

If that’s not enough, Cracks in the global private credit market expanded to Wall Street giant BlackRock, which reportedly began limiting withdrawals from its $26 billion private credit fund amid rising redemption requests. Following similar stress at Blue Owl, which sold $1.4 billion in loans last month to meet withdrawals, the events started to rattle investors.

Reality check

So what does this week’s episode mean? A growing reality in crypto markets: macro matters more than crypto-native news.

Over the past several years, bitcoin has become more tightly correlated with the Nasdaq and other risk assets as institutional investors entered the market. Hedge funds, asset managers and ETF flows increasingly treat bitcoin as part of a broader portfolio of macro-sensitive assets, reacting to liquidity conditions, interest rates and dollar strength.

Ironically, the same institutional adoption that many in the industry have long sought may be contributing to this dynamic.

As bitcoin becomes embedded in traditional financial portfolios, its price is increasingly influenced by the same forces that move equities, commodities and currencies. When the dollar rallies or interest-rate expectations rise, liquidity tightens across markets — and crypto is rarely immune.

That doesn’t mean the steady drumbeat of institutional developments is irrelevant. The expansion of custody services, banking access, and exchange investment points to a deeper, more mature crypto market structure forming beneath the surface.

Who is selling?

One question investors ask when such conflicting price action batters the markets is: Who is selling?

The macro risk seemed to have spooked mostly the short-term bitcoin holders, who cashed out as bitcoin hit $74,000.

These short-term holders transferred more than 27,000 BTC ($1.8 billion) to exchanges in profit over the past 24 hours — one of the largest spikes in recent months, according to CryptoQuant analyst Darkfost.

Short-term holders are typically the most reactive group in the market, and their selling reflects lingering caution amid the ongoing war in Iran and other macro uncertainties. These holders act more like traders, going in and out of an asset to make quick profits, rather than investors who want to buy and hold for the long term. And with bitcoin’s thin liquidity, these moves make a dent in the price action

And the data shows that.

The only short-term investors currently in profit are those who accumulated bitcoin between one week and one month ago, at a realized price of roughly $68,000, suggesting some recent buyers above that price are choosing to lock in gains rather than extend their positions.

In the short term, with crypto in the midst of a bear market dating back to early October and macro uncertainty, price is the only thing that matters to investors.

Silver lining

But it’s not all doom and gloom.

A recent Binance Research report noted that U.S. spot bitcoin ETFs recorded roughly $787 million in net inflows last week — their first positive weekly flows since mid-January — suggesting that some institutional investors may be beginning to re-engage with the market after several weeks of persistent outflows.

In fact, in a recent conference, giant university endowment funds, which tend to focus on long-term return, said that they have begun looking into other alternative investment ideas, including digital assets-related ETFs, given the sky-high valuations of traditional equities.

The report also pointed to signs that speculative excess may already have been flushed out.

Bitcoin funding rates have fallen to their lowest levels since 2023, indicating that leveraged long positions have largely been unwound — conditions that historically create a cleaner foundation for more durable rallies driven by spot demand rather than short-term speculation.

In the end, it all comes down to conviction and market moves.

Some traders called the sharp rally earlier this week a “bull trap” — a brief breakout that lures in late buyers before reversing lower. While institutional conviction is on the rise, with thin liquidity, a skittish market, macro headwinds and a lack of clear catalysts, bitcoin’s price action, at least this week, seems to have proven them right so far.

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