Bitcoin rebounded further Tuesday, breaching $55,000 for the first time in roughly two weeks, leading to expectations that it would retest its all-time high above $58,000 in the coming sessions.
Bitcoin against Bond Yields
Traders appeared to bargain-hunt, pouncing on cryptocurrencies that fell over the past several weeks. Prices of Bitcoin, Ethereum, Polkadot, Binance Coin, and many others rose by good percentages in the previous two weeks, paring a good portion of the losses they faced in the week ending February 28.
Meanwhile, a selloff in government bonds cooled off for the first time in five back-to-back sessions. The 10-year US Treasury yield inched lower to 1.545 percent on Tuesday, a day after it reached $1.594 percent, the highest level in more than a year.
Bitcoin and the rest of the cryptocurrency market remained choppy against the rising bond yields, especially after the bloody February week that saw BTC/USD declining by 21 percent as the 10-year note yield popped to 1.525 percent. At the year’s beginning, it was 0.917 percent.
But the stabilization in bond markets helped Bitcoin recoup some of its losses. Tech shares that also suffered due to rising yields managed to post gains on Tuesday after days of consecutive declines. As a result, the tech-heavy Nasdaq Composite closed the previous session 3.7 percent higher, logging its best one-day performance since November 4.
The S&P 500 and the Dow Jones added 1.4 and 0.1 percent, respectively.
Daniel Morris, the chief market strategist at BNP Paribas Asset Management, called it a “buy-the-dip mentality.” Helping the buoyant mood were signs that the US lawmakers stay on track to pass the $1.9 trillion stimulus package proposed by President Joe Biden’s administration with adjustments later this week.
That, coupled with a speedier coronavirus vaccination program, could lead investors to rotate out of overvalued assets, including bonds and tech stocks, to put money in the so-called pandemic losers—sectors such as banking, energy, and hospitality.
But Nick is hopeful that Bitcoin would still rise, despite having surged by more than 1,200 percent already since March 2020. The Ecoinometrics newsletter’s author wrote:
“The fact that Bitcoin seems to keep up with the rise of interest rates is definitely a good sign. This means that adoption remains the main driver of this cycle. If you believe that to reach its natural market size (physical gold) Bitcoin has 10x more to grow then you aren’t worried about the temporary rising yield situation.”
He added the Federal Reserve would have to apply yield curve controls if the US Treasury bond sells off any further. Otherwise, the US central bank would risk crashing the stock market, which it cannot afford as the economy recovers.