Bitcoin has entered a bearish channel after slipping below key support near $72,000, marking a significant decline from its previous levels. The cryptocurrency is down nearly 10% from May highs amid escalating market pressures, with $1.43 billion in Bitcoin outflows leading the digital asset funds' third consecutive week of withdrawals. According to CoinShares, weekly outflows reached $1.67 billion, representing the second-largest weekly withdrawal year-to-date. The breakdown comes after Bitcoin tested critical support levels as a small bear flag pattern broke down, with the cryptocurrency down about 1% to start June amid ongoing geopolitical tensions. Despite the breakdown, selling volume has decreased, allowing buyers to defend this support level at the critical $72,754 level. Bitcoin was trading near $66,300 on Wednesday after sliding from above $71,000 earlier this week, as reported by latest market data.
Bitwise has drawn a new valuation argument for Bitcoin as rising sovereign debt pressures keep bond markets under strain and strengthen the case for BTC as a macro hedge. The asset manager linked the argument to stress in global bond markets, where governments and companies face a much heavier borrowing calendar in 2026. The OECD expects public and corporate borrowers to raise about $29 trillion in 2026, which is 17% higher than 2024 levels and nearly twice the amount raised a decade earlier. Bitwise noted that about 78% of OECD governments' borrowing will go toward refinancing existing debt rather than funding new spending, which may raise investor concerns about sovereign balance sheets if yields remain elevated. In this setting, Bitcoin could attract more attention from investors looking for assets outside government credit systems.
Japan received special attention in the Bitwise report because of its high debt load and rising bond yields. Japan's public debt stands at nearly 230% of GDP, placing it among the highest debt burdens of major economies. The firm noted that Japan's 10-year government bond yield recently climbed to 2.78%, while its 30-year yield reached a record high. By Tuesday, Japan's 10-year yield stood at 2.66%, while Japanese investors hold around $1.2 trillion in US Treasurys. Bitwise compared Japan's 10-year yield of 2.66% with the 2.19% yield available on yen-hedged 10-year US Treasurys, noting that this gap could encourage Japanese capital to return to domestic bonds. The report also highlighted that US 30-year Treasury yields reached 5.11% on May 11, the highest level since 2007.
Bitwise cited investor Greg Foss's sovereign default risk model, which values Bitcoin near $224,000 if it gains wider use as a hedge against government credit risk. The firm stressed that this figure is theoretical and not a formal price target. The report also said Bitcoin's path will depend partly on real interest rates, which Bitwise calculated as the Fed Funds rate minus US CPI inflation. Bitwise noted that Bitcoin performed well during the 2021 bull market as real rates fell, while the 2022 bear market coincided with rising real rates amid aggressive Federal Reserve tightening. Meanwhile, Bitcoin researcher Sminston said BTC could trade between $90,000 and $255,000 by the end of 2026, based on the Bitcoin Decay Channel model that tracks past cycle tops and bottoms. The theoretical $224,000 fair value depends on the weighted default probability across G20 sovereigns and the market capitalization of the bonds being notionally insured.
The Bitwise report flagged some near-term headwinds for bitcoin as well. Higher global bond yields have made Strategy's (MSTR) STRC perpetual preferred equity dividends less attractive to investors, and STRC has recently traded below par. Strategy buys have accounted for roughly two-thirds of institutional bitcoin demand via global treasury companies and bitcoin ETPs through 2026 to date, per Bitwise's count, meaning a stall in Strategy's STRC-funded accumulation could materially dent the flow. The report also highlighted one of the most extreme divergences between bitcoin and U.S. large-cap tech it has observed. Bitcoin's market-value-to-realized-value ratio sits in the lower half of its historical distribution, with only 36% of historical readings below the current level. The NASDAQ 100's price-to-book ratio, by contrast, is at its highest level on record, with 99% of historical readings below the current level.
