Bitcoin $70K Floor Under Threat – Bitfinex Warns $120 Oil Spike Could Trigger Hawkish Fed Pivot

Bitcoin’s price fell below $70,000 after oil prices surged higher towards $100 despite the IEA announcing the release of a record 400 million barrels of oil from its emergency reserves.

• Bitfinex analysts warned that a sustained rise in oil prices toward $120 could push the Federal Reserve toward tighter monetary policy.
• Such a move could impair Bitcoin’s recovery, Bitfinex said, noting that the crypto market has undergone significant deleveraging.
• Aurelie Barthere, Nansen’s Principal Research Analyst, told Stocktwits that oil futures may provide the clearest real-time signal of whether markets expect tensions between the United States and Iran to ease.

Bitcoin (BTC) has been holding strong amid the U.S.-Iran war and the volatility in oil prices, but analysts warn that the apex cryptocurrency can only hold out for so long before it also plummets under the pressure.

Bitcoin’s price edged 0.7% lower in the last 24 hours, dropping below the $70,000 support level to around $69,300 on Wednesday night after oil prices surged towards $100 for a second time this week. On Stocktwits, retail sentiment around the apex cryptocurrency remained in ‘neutral’ territory over the past day.

Bitcoin Recovery Under Threat If Oil Prices Cross $120

“Should oil spike towards $120 and remain there, the Federal Reserve would likely be forced into a hawkish tilt, which would invalidate the recovery thesis,” said analysts at cryptocurrency exchange Bitfinex. “If energy costs stabilise, however, the “digital gold” narrative for Bitcoin is likely to strengthen as investors seek sovereign-grade liquidity outside the fiat system.”

The firm cited a study done by the Federal Reserve, which showed that every sustained $10 increase in oil prices can raise U.S. consumer price index (CPI) by 20 basis points. It said this stagflationary threat represents the primary headwind for risk assets. 

According to Bitfinex, Bitcoin is currently in a phase driven more by spot demand than by leveraged trades. It noted that the Leverage Reset Index is at a multi-year low of 0.32, which is normally a signal of price discovery being driven by spot buyers rather than leveraged speculation. 

Oil Futures Are The Key Signal To Watch

According to on-chain analysis firm Nansen, oil futures remain the clearest real-time gauge of whether investors are starting to price in a cooling of tensions. Aurelie Barthere, the firm’s Principal Research Analyst, said markets are watching for any indication that Iran may be willing to wind down the conflict despite its current military position. “The most immediate market barometer for that shift is likely to be oil futures,” she told Stocktwits over email.

Many users on Stocktwits also noted that Bitcoin’s momentum weakened after oil prices began to spike overnight on Wednesday.

Some forecast that while Bitcoin may outperform equities, real assets like gold, silver and oil are likely to do better amid the war-driven market fears.

Oil Prices Jump Higher Even After Reserve Release Plans 

Crude oil futures were up more 8.5% in overnight trade, according to TradingView data, even after the International Energy Agency (IEA) said Wednesday that it would release 400 million barrels of oil from emergency reserves, marking the biggest coordinated drawdown since the agency was created in the aftermath of the 1973 oil embargo. 

The announcement failed to ease tensions around the U.S.-Iran war. The United States Oil Fund (USO) was among the top trending tickers on Stocktwits at the time of writing, moving higher by around 8% after hours. Retail sentiment around the fund continued to trend in ‘extremely bullish’ territory over the past day, with chatter at ‘extremely high’ levels. Platform data showed message volumes rose by over 400% in the last seven days.

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