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Bitcoin faces ‘crucial’ 36 hours due to increased sensitivity to US yields
(Bloomberg) — Global markets are awaiting a decision from the Federal Reserve on interest rates and key U.S. inflation numbers. Bitcoin investors have reason to be particularly mindful of potential volatility.
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A 30-day correlation between Bitcoin and the 10-year U.S. Treasury yield is minus 53, one of the most negative readings in data compiled by Bloomberg since 2010. The measure suggests that today’s largest digital asset is moving in the opposite direction to that of Bitcoin. the benchmark bond yield to an unusual degree.
Bonds could be shaken by inflation data and the Fed’s policy outlook, both of which are due in a few hours on Wednesday. The correlation study hints at the risk of Bitcoin being tossed around in the wake of the Treasury market.
Bitcoin faltered on Tuesday, sliding as much as 4.2% to its lowest level in a week and hovering at $67,210 as of 9:19 a.m. in New York. Smaller tokens such as Ether and meme-favorite Dogecoin also led to losses.
Bitcoin hit a record high of $73,798 in mid-March, driven by inflows into dedicated US exchange-traded funds. But it has struggled to reach new highs over the past three months. For Tony Sycamore, market analyst at IG Australia Pty, Bitcoin’s recent failed attempts to reach all-time highs are ringing “alarm bells.”
‘Lack of progress
“The lack of upside progress over the past few weeks is concerning given the recent large inflows into Bitcoin ETFs, which have so far failed to turn the wheel,” Sycamore said. “The next 36 hours are going to be crucial.”
A net $15.6 billion has been invested in ETFs since their launch in January. On Monday, $65 million was removed from the products, ending a streak of 19 consecutive days of subscriptions, according to data compiled by Bloomberg.
Inflation data is expected to show price pressures well above the US central bank’s comfort zone. At the start of the year, investors were betting on a series of rate cuts from the Fed, but the debate now is whether future easing will amount to a slight change in monetary policy.
A prospect of higher long-term borrowing costs could provide a challenging backdrop for a speculative asset like Bitcoin, which has already more than quadrupled since the start of 2023, following a deep bear market.
Fairlead Strategies LLC technical analyst Katie Stockton, in a research note, reported “neutral” short-term momentum for the digital token based on chart patterns, while adding that the long-term outlook is more positive.
The story continues
The crypto market “is like a drug addict who constantly needs bullish news to stay awake,” said Anand Gomes, co-founder of Paradigm, a derivatives platform. “So when there isn’t one, the path of least resistance is lower.” »
–With help from Ryan Weeks and Sidhartha Shukla.
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