Bitcoin fell to its lowest level since the post election rally before recovering after U.S. lawmakers approved a short term government funding package, easing immediate shutdown risk but leaving markets cautious.
Bitcoin dipped to about $72,900 before rebounding as the U.S. House narrowly passed a $1.2 trillion funding bill that ended a partial government shutdown, according to market commentary published Tuesday by QCP Capital. The move reduced near term political uncertainty and helped stabilize prices after a sharp selloff.
The decline was accompanied by a pullback in derivatives positioning. QCP said futures open interest compressed during the drawdown, while funding rates turned negative as selling accelerated. The firm said this reflected traders cutting leverage rather than building new bearish positions. After the rebound, bitcoin prices were testing whether they could regain acceptance above the $75,000 level.
Despite the relief rally, QCP said fiscal risks remain unresolved. Funding for the Department of Homeland Security was extended only through February 13, keeping another potential deadline in focus and raising the risk of renewed volatility tied to U.S. budget negotiations.
Geopolitical developments added to cross-market uncertainty. QCP said oil prices are “rebuilding a modest geopolitical premium” after the United States shot down an Iranian drone that approached the aircraft carrier USS Abraham Lincoln in the Arabian Sea. However, the investment firm said “diplomacy headlines are still capping the move.”
Attention has also turned to U.S. monetary policy. QCP noted that Donald Trump’s nomination of Kevin Warsh as Federal Reserve chair has reintroduced uncertainty around interest rates and balance sheet policy. Warsh has signaled support for faster balance sheet reduction, a stance that could tighten liquidity conditions.
Options markets reflected ongoing caution. QCP said near term implied volatility remained elevated despite the rebound, while downside protection continued to command a premium, indicating persistent demand for hedging against sharp moves.
