Bitcoin struggles below $120K as macro risks rise, altcoin market turns red

Bitcoin’s rally lost steam below the psychological $120,000 threshold this week, as renewed macroeconomic uncertainty and strategic profit-taking sparked a broad risk-off move across crypto markets.

Total digital asset market capitalization contracted by roughly 4.5%, falling from $4.02 trillion to $3.84 trillion. Losses accelerated in the back half of the week, erasing gains across most major tokens and dragging sentiment lower.

The Crypto Fear and Greed Index, a widely tracked gauge of investor sentiment, shed seven points from its weekly high of 75.

While the metric remained in the “greed” range, the sharp decline underscored growing caution among traders amid shifting macro signals.

Altcoins bore the brunt of the reversal. Most large-cap tokens surrendered early-week gains, with only a select few managing to post marginal upside. 

Sector breadth narrowed significantly, suggesting capital rotated out of speculative positions in favor of short-term risk mitigation.

Why is Bitcoin going down?

As of late Asian trading hours on Friday, Bitcoin had dropped nearly 3.5% from its weekly high of $119,729.

Much of the early week slowdown stemmed from investor uncertainty ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting. 

Traders reduced exposure to risk assets, anticipating signals from the Federal Reserve on the future path of interest rates. 

Although the Fed kept rates steady at 2.25%–2.50%, it reiterated a data-dependent approach, with no clear commitment to rate cuts this year—a stance that fell short of dovish market expectations.

The situation worsened in the latter half of the week as fresh bearish catalysts emerged. Bitcoin briefly touched a three-week low of $114,917 on Friday amid a sharp downturn across the digital asset space. 

According to Coinglass, more than $629 million in leveraged crypto positions were liquidated between Thursday and Friday, marking a 45% increase in forced unwinds compared to the previous day. 

Broader macroeconomic developments also weighed on sentiment. Strong US economic data reduced the likelihood of imminent rate cuts, as markets began pricing in a prolonged period of tight monetary policy. 

The resilience of the labor market and persistent inflation concerns have prompted investors to pivot away from high-risk assets such as cryptocurrencies, shifting instead toward safer alternatives like bonds.

Meanwhile, new US tariffs that took effect on August 1 injected additional uncertainty. The Trump administration imposed a 25% tariff on goods from India and a 50% levy on semi-finished copper. 

Other nations affected include South Korea, South Africa, Brazil, and Switzerland, which face tariffs between 15% and 50% tariff on most exports. 

These actions have raised fears of disrupted supply chains, especially for industries linked to crypto mining hardware and infrastructure.

The geopolitical escalation added to market jitters, reinforcing a broader retreat from speculative assets. 

While the US has signed trade agreements with Japan, the UK, and the EU, the persistence of elevated tariffs means inflationary pressures could remain sticky, further complicating the Fed’s policy roadmap.

Adding to the bearish tilt, data from the Bureau of Labor Statistics showed the US. economy added just 73,000 jobs in the latest print, while the unemployment rate edged up to 4.3%. 

Though modest, the softness aligns with the Fed’s projections that growth will slow in the coming months, especially as the effects of tariffs spread across sectors.

Simultaneously, institutional flows have also thinned.

Spot Bitcoin ETFs recorded net outflows of $114 million on Thursday, according to SoSoValue, continuing its downtrend from July’s peak inflows. 

Ethereum ETFs reflected a similar pattern, with weekly inflows slowing to $306 million, well below the $2.1 billion recorded two weeks prior. 

When institutional participation fades, it often amplifies the market’s vulnerability to downside moves.

On top of that, August has historically been a weak month for crypto performance. 

Bitcoin fell 8.6% in August 2024, 11.2% in 2023, and 13.8% in 2022. Ethereum has also posted consistent losses during this period, with the average August return for the asset class sitting at just 5.14% since 2015.