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Bitcoin’s latest price pullback to $35,000 was driven by softer U.S. inflation, China’s economic challenges and regulatory uncertainties.

Bitcoin (BTC) recently surged above $37,000 between Nov. 10 and 12, only to falter and undergo a correction toward $35,000 on Nov. 13.

This abrupt movement triggered the liquidation of $121 million worth of long futures contracts, and while Bitcoin’s price stabilized around $35,800 on Nov. 14, investors are left pondering the underlying factors behind this downturn.

U.S. inflation, gov’t shutdown impact on BTC price

Part of the catalyst behind this movement was the unexpected softening of United States inflation data on Nov. 14. The U.S. Consumer Price Index (CPI) showed a 3.2% increase in October compared to 2022, leading to a decline in yields on U.S. short-term Treasurys.

This triggered buying activity in traditional assets, potentially reducing the demand for alternative hedge instruments like Bitcoin. If the Federal Reserve’s strategy to curb inflation successfully without causing a recession pans out, Bitcoin may lose some of its appeal as a hedge.

Even Moody’s rating agency lowering its outlook on the U.S. credit to negative from stable on Nov. 11 did not sway favorably toward Bitcoin and other alternative hedges. Instead, investors sought refuge in short-term 5.25% fixed-income instruments, explaining why gold struggled to surpass $2,000 despite escalating debt levels and global economic challenges.

In China, October’s retail sales data indicated a 7.6% increase — the fastest since May. However, this apparent recovery conceals underlying issues, notably a 9.3% decline in property sector investments in the first 10 months of the year. China’s economic stimulus measures, including policy support and liquidity injections, have yielded only modest benefits.

Given that China is the world’s second-largest economy, its economic situation might contribute to investors’ cautious stance on riskier assets like Bitcoin, particularly when viewed within the broader global economic context. Additionally, recent political developments surrounding U.S. government shutdown threats could also influence Bitcoin’s performance.

The U.S. House of Representatives passed a bill on Nov. 14 to keep the government operational through the holiday season, temporarily averting a fiscal crisis. However, this measure sets the stage for potential spending disputes in the coming year, including a provision to cut federal spending by 1% across the board in 2024 if no agreement is reached.

Spot Bitcoin ETF expectations, regulatory scrutiny

The cryptocurrency market experienced a negative reaction to a fraudulent BlackRock XRP trust filing on Nov. 13. Although it initially sparked hopes for an XRP (XRP) spot exchange-traded fund (ETF) in the U.S., the $9 trillion asset manager swiftly dismissed the claim.

While this event is not directly linked to Bitcoin, it has drawn regulatory scrutiny to the crypto sector at a sensitive time when numerous spot Bitcoin ETF applications await review by the U.S. Securities and Exchange Commission (SEC). Consequently, irrespective of the parties involved, the outcome represents a net positive for the cryptocurrency market.

Related: Tether credits USDT growth surge to ETF excitement, emerging markets

On Nov. 13, Bloomberg ETF analyst James Seyffart emphasized that approval for a spot Bitcoin ETF should not be expected before January. This statement came amid heightened market anticipation surrounding upcoming SEC decisions scheduled for Nov. 17 and Nov. 21.

Heightened fear of global economic recession

In essence, the drop in Bitcoin’s price after flirting with the $37,000 level cannot be attributed to a single event. Investors may have reassessed their positions, considering Bitcoin’s substantial $725 billion market capitalization. For comparison, Berkshire Hathaway, a major conglomerate, boasts a $760 billion valuation while posting profits of $76.7 billion in the past year.

Bitcoin’s stringent monetary policy ensures scarcity and predictability, but major global corporations can repurchase their own stocks using earnings, effectively reducing the available supply. Furthermore, during economic downturns, these trillion-dollar companies can leverage their strong balance sheets during economic downturns to acquire competitors or expand their market dominance.

Ultimately, Bitcoin’s challenge in maintaining momentum above $37,000 is influenced by factors such as data supporting the Federal Reserve’s strategy for a soft economic landing and concerns over global economic growth. These elements continue to create an unfavorable landscape for Bitcoin’s value, especially if the SEC delays decisions on spot BTC ETFs, aligning with market expectations.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.