Weekly Fundamental Forecast for Cryptocurrencies: Is Risk Sentiment Deteriorating?

Cryptocurrencies have begun to show a decline in short-term confidence as new market fears emerge, signaling a reduced appetite for risk. For now, investors are moving toward safe-haven assets in search of greater stability. This environment has led to steady bearish movements in the crypto market, as capital flows toward traditional markets and exposure to digital assets decreases. If this risk-off sentiment persists, it could result in stronger selling pressure in the coming trading sessions.

Safe-Haven Assets Begin to Dominate

The week has been marked by a persistent sense of risk, driven by growing perceptions of a potential overvaluation in the artificial intelligence sector, as several technology companies have failed to deliver the consistent earnings growth that investors expected. Adding to this is the uncertainty created by the neutral stance of major central banks, which has led the CNN Fear & Greed Index to hover around 24 points, reflecting an overall sentiment of “extreme fear” among investors.

With risk appetite under pressure, the market has started shifting toward safer assets that have become attractive in the short term. This shift has benefited instruments such as U.S. Treasury bonds, whose yields have been rising steadily in recent sessions—reaching the 4% area for the first time in weeks—offering a more stable investment alternative with growing returns and prompting capital to flow from other markets into these assets.

Source: TradingEconomics

In this context, the change in market perspective has reduced interest in risk assets, including cryptocurrencies, which have seen a steady capital outflow into safer assets such as the U.S. dollar and 10-year Treasury bonds. This trend is reflected in the decline in Bitcoin’s open interest, an indicator that measures the total number of open positions in the market. It has fallen to around $34 billion, marking one of the sharpest drops of the year. This decline, combined with a steady fall in BTC prices, reflects a continuous reduction in long positions, confirming that demand for Bitcoin has turned negative in the short term.

Source: Cryptoquant

As the market continues to favor safer assets, Bitcoin and the crypto market as a whole appear unable to attract sustained interest. If bond yields remain appealing, this could trigger an ongoing capital outflow from the crypto market and lead to persistent selling pressure in the coming sessions.

 

Bitcoin Compared to Other Markets

Recent movements in Bitcoin (BTC) show an increasingly negative correlation with the DXY index, which measures the strength of the U.S. dollar against other major currencies. On average, over the last 50 sessions, the correlation coefficient has remained below -0.5, suggesting that as the dollar strengthens, BTC tends to weaken. It’s important to note that this correlation can change as market conditions evolve.

This trend indicates that market demand has shifted toward assets like the U.S. dollar, partly driven by the growing appeal of bonds. As long as this negative relationship persists, demand for Bitcoin and other cryptocurrencies may struggle to recover in the short term, as digital assets are currently seen as less attractive compared to lower-risk options.

Source: Data – TVC, StoneX, Tradingview

Additionally, relative volatility levels have positioned the U.S. dollar index as one of the most stable short-term assets, in contrast to cryptocurrencies such as Bitcoin and Ripple, which have shown higher-than-average volatility in recent weeks. Overall, the relative volatility of the U.S. dollar has remained stable throughout the year, consistent with a broader risk-off market sentiment. Conversely, cryptocurrencies continue to exhibit higher volatility, limiting their role as hedging instruments during periods of economic uncertainty.

Source: Data – TVC, StoneX, Tradingview

Thus, as the inverse correlation remains dominant and cryptocurrencies continue to display higher volatility compared to assets like the U.S. dollar, it will be difficult for stable demand to form in the short term, leaving room for ongoing selling pressure.

 

Market Sentiment Behavior

The Crypto Fear & Greed Index currently sits at 24 points, below last week’s close, and continues to oscillate within the “fear” zone, nearing “extreme fear” territory. This reflects a lack of confidence in the short term within the cryptocurrency market, which could further limit the recovery in demand.

Source: Coinmarketcap

If the index continues to approach extreme fear levels, negative sentiment could intensify selling pressure, increasing the likelihood of sharper declines across major cryptocurrencies, including Bitcoin.

 

Written by Julian Pineda, CFA – Market Analyst

Follow him on: @julianpineda25