Connect with us

Bitcoin

Bitcoin Reclaims $30,000 After Fed Keeps Policy Steady; What’s Next?

Published

on




Bitcoin prices reclaimed $30,000, a psychological support level, hours after slipping below it during the New York session Wednesday as investors assessed Jerome Powell’s decision to keep the Federal Reserve’s dovish policies steady.

The US central bank chief asserted that his office would hold the benchmark interest rates near zero while purchasing government and corporate bonds at a rate of $120 billion per month. He noted that their expansionary policies would stay firm until the US economy achieves maximum employment and inflation above 2 percent.

“The [coronavirus] pandemic still provides considerable downside risks to the economy,” Mr. Powell stressed.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin recovers back above $30,000. Source: BTCUSD on TradingView.com

Bitcoin climbed to an intraday high of $31,880 after Mr. Powell’s comments, only to pare a small portion of those gains while entering the early Asian session Thursday. The benchmark cryptocurrency was trading near $31,500 at the time of this writing on low volumes, suggesting an underlying short-term bias conflict among traders in the market.

That is partially due to a stronger US dollar. The greenback closed Wednesday 0.53 percent higher at 90.64 against a basket of top foreign currencies. Meanwhile, US stocks notched their worst day of 2021, with the benchmark S&P 500 and the tech-savvy Nasdaq Composite each plummeting 2.6 percent. Gold fell 0.23 percent.

Bitcoin against Falling Yields

Investors instead clamored into government bonds. The rally in the benchmark US 10-year Treasury note sent its yield briefly below 1 percent on Wednesday. Later, it settled at 1.01 percent. Traders in the Bitcoin market perceives lower bond yields as their cue to increase their bids on the cryptocurrency.

US government bond, US Treasury, US bond yields

US 10-year Treasury yield plunges as demand for bonds rises. Source; US10Y on TradingView.com

Josh Rager, an independent market analyst and head of BlockRoots.com, meanwhile focused on Bitcoin’s technical prospects as it remained choppy around $30,000. Recalling the cryptocurrency’s price movements from the past, he noted that BTC/USD has a habit of entering prolonged consolidation periods after its parabolic moves. And the current situation is no different.

“Back in 2016-2017, there were times when Bitcoin hit a local high, followed by a pullback where it took several weeks to a couple of months for the price to reclaim the high and move higher up,” Mr. Rager tweeted. “Be patient here — Bitcoin will hit another high, but it may take weeks to get there.”

Bubble Woes

But skeptics noted bubble-like features in the Bitcoin market as it swelled by more than 1,000 percent in just 10 months of trading.

Deutsche Bank surveyed 627 global market professionals earlier in January to rate the ongoing market bubbles on 0 to 10, with 10 pointing to “extreme bubble.” Bitcoin got a score of 8.7.

But even sovereign debt has become a bubble, believes Luke Gromen, the founder of research firm FFTT.

“I think at a very minimum, before this is all said and done, we’re likely to see negative 5-10% real interest rates in the U.S.,” he told Blockworks.

“I think at this point, Bitcoin has been on top in terms of performance, but I think it’s all being driven by the same dynamic, which is this bursting global sovereign debt bubble,” he added.





Source link

Bitcoin

Fractal From Last Bull Run Says Bitcoin Will Hit $100K By May

Published

on

By




Bitcoin price is back over $50,000 after bullish news broke this morning regarding Coinbase officially filing to go public. However, according to a fractal from the last bull market cycle kicking off in early 2017, that number could be merely the halfway point to where the cryptocurrency will trade in just two months from now.

Here’s a look at the similarities between the two cycles, and the roadmap that takes the price per BTC to $100,000 and higher within the next couple of months.

Characteristic Bitcoin Volatility Returns, Price Swings Reach $10,000 In A Single Day

Bitcoin volatility is picking up, starting with an explosive move from $10,000 to $50,000 in a few short months. The complete repricing of the coin has been due to institutional investors scrambling to buy what they can of the scarce crypto asset.

RELATED READING | BITCOIN HASN’T REACHED MANIA STAGE YET, ACCORDING TO THIS METRIC

At only 21 million coins and a market cap of under $1 trillion, Bitcoin is expected to grow in the long-term reliably. And in an economic climate where growth is challenging to come by, the cryptocurrency has become especially attractive.

But as Bitcoin price discovery takes place, volatility is bound to ensue and is has in recent weeks as the cryptocurrency recently shed 20% in a single day. At prices of $50,000 per coin, a 20% dive means $10,000 in value apiece evaporating into thin air, compared to the $1,000 per plunge crashes during the last bull market.

bitcoin price fractal $100k

The structure is strikingly similar, albeit less volatile overall | Source: BTCUSD on TradingView.com

Early 2017 Fractal Suggests Deeper Downside Possible, Rebound To $100K By May

On the way up the last time around, price action closely resembled the current market volatility. Taking a comparison between early 2017 when Bitcoin was trading in the four-digit range and now, the similarities are strikingly clear.

If the same path is followed, Bitcoin could see further collapse before experiencing a sharp rebound to more than double the price. The price action will play out quickly, taking Bitcoin price first to $75,000 in April, then $100,000 by the time May rolls around.

RELATED READING | BITCOIN TREND STRENGTH MORE POWERFUL THAN 2017, ONLY JUST BEGINNING

It is also important to note that the path following the fractal continues onward from there as well. By the time the fractal runs out of room on the price chart above, the cryptocurrency tapers off at just $2,000 per BTC.

The cryptocurrency did another 10x from the end of the above price action, and if the fractal continues the same from current levels, it could potentially put each Bitcoin at a price of $1 million per coin before the top of this cycle is in.

What do you think – can Bitcoin price really climb that high before the next peak is in?

Featured image from Deposit Photos, Charts from TradingView.com



Source link

Continue Reading

Bitcoin

Soaring Treasury yields are worrying economists — But what does this mean for Bitcoin?

Published

on

By


This week’s correction in the price of Bitcoin (BTC) showed that a market doesn’t go up in a straight line. Meanwhile, another topic has been gaining attention, namely the big rise in the 10-year yields of U.S. government bonds. 

In recent weeks, the 10-year Treasury yield of U.S. government bonds has surged by 35% to a new high of 1.44%, the highest point since the cross-asset crash in March 2020.

Treasury yield bounces from a 60-year low

U.S. 10-Year Yield 1-week candle chart. Source: TradingView

The 10-year Treasury yield has been accelerating massively in recent weeks, similar to the run-up to the economic downturns in 2000 and 2008. Hence, rising yields are typically considered a signal of weakness for the economy and can have a big impact across many markets.

As the yields increase, governments must pay more for their underlying government bonds. This combed with the current economic conditions of the post-Covid era and record national debt are factors that are unsurprisingly worrying economists. 

However, looking at the chart above from a technical perspective, this entire run can still be considered as a simple bearish retest of the previous support level.

Such an example is shown by the previous attempt to test the resistance above. This could be happening here as well, where the rates will then drop back down from the 1.53% level. But it is important to keep an eye on this level because breaking through it can have a major impact on the markets.

The government bond yields also have an impact on mortgage markets. Given that the real estate market is massively overheated at the moment with people taking on massive debt to purchase homes, an increase in interest rates could pop this entire bubble similar to what happened in 2008.

However, yields also impact other markets as gold often reacts to these moves as well. But is this time different? And how will Bitcoin respond to these potential macroeconomic shocks?

A weakening dollar vs. Bitcoin

U.S. Dollar Currency Index 3-day chart. Source: TradingView

The Dollar Currency Index (DXY) index continues to show weakness as yields are rising, which is generally good news for Bitcoin bulls. This suggests that investors are fleeing the dollar toward higher risk, higher reward investments, such as Bitcoin.

However, from a technical perspective, the DXY saw a bearish retest at 91.50 points, followed by more downside for the USD, as seen in the chart above. Now, a retest of the 90 points level is underway, with the primary question being whether this level will hold as support.

BTC/USD vs. DXY. Source: TradingView

Nevertheless, it’s debatable whether the rise in yields is having any direct effect on the price of Bitcoin, particularly in recent days. Meanwhile, the DXY has often been inversely correlated with the price of Bitcoin, though this has been decreasing in recent months (see: below).

BTC rolling 90-day correlation vs. USD, VIX, Gold, S&P500. Source: Digital Assets Data

Since the crash in March, this inverse relationship grew stronger until September 2020, as a weakening USD was accompanied by a major increase in BTC price.

Of course, assets are only correlated until they aren’t, and many other factors can have a much bigger impact on BTC in the short term, e.g. miners or whales selling Bitcoin, government regulations, etc. 

Why is gold showing weakness?

Gold 3-day chart. Source: TradingView

The 3-day chart for gold price shows a clear-cut correction since August 2020. More importantly, the increase in yields or the weaker dollar has not impacted the gold market as much as Bitcoin’s.

Even with the recent surge in yields, people are not buying gold. In fact, an increase in yields has historically not benefitted gold — at least not in the short term — because higher yields would make government bonds more attractive for funds to hold for settlement and as a risk-off asset in their portfolios.

When yields continue rising toward higher levels, however, the uncertainty surrounding the economy also increases, and investors typically begin to shift from the dollar to gold as a safe-haven. This was seen in the 1980s when yields ran toward 14% and gold also spiked to new all-time highs.

BTC has become increasingly important in macroeconomics 

In the current state, however, falling gold prices may simply be an immediate reaction to the increase in yields in general. However, another possibility is that an increasing number of investors are opting for “digital gold” instead of the precious metal, not only because of the higher upside potential, i.e. risk-reward but also because these positions can be liquidated much easier.

But, another possibility is that an increasing number of investors are preferring “digital gold” to the precious metal — not only because of the higher upside potential but also because these positions can be liquidated much easier on digital trading platforms.

Today, the market capitalization of Bitcoin is still only 7-10% of gold’s, which highlights this massive upside potential.

Therefore, the macro conclusion that can be drawn is that the markets are becoming increasingly uncertain about the economy’s and the dollar’s future, as exemplified by the rising 10-year Treasury yields. However, it’s still too early to write off the recent correction in BTC price to this macroeconomic development as multiple other variables are at play.

Ultimately, the rising yields and a weakening dollar is an exciting development to keep an eye on moving forward. With Bitcoin becoming an increasingly important player in the macroeconomic environment, strategists at JPMorgan, for example, say BTC may continue to eat away at gold’s market share. This will likely result in an even higher valuation for Bitcoin, particularly in the event of another economic crisis at the expense of gold.

In December 2020, the JPMorgan strategists noted:

“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.