Bitcoin was trading lower during the New York session Friday as US Treasury Secretary Steven Mnuchin delivered a downbeat outlook about the second coronavirus stimulus package.
The benchmark cryptocurrency fell by up to 2.30 percent to circa $12,722, a reversal from buying earlier this week that saw its price establishing a new year-to-date high at $13,250.
Bitcoin’s move downside appeared largely because of profit-taking at the end of daytraders. Nevertheless, it also surfaced as traders expressed caution about opening new Long positions against the stimulus uncertainty.
Mr. Mnuchin hinted at further disagreements with the House Speaker Nanci Pelosi as the two continued their negotiations to finalize an approximately $2 trillion fiscal relief for American households and businesses. The talks also featured in the final campaign debate between Donald Trump and his presidential contender Joe Biden.
Investors believe a major win for Mr. Biden that would bring both the Senate and House of Representatives to the Democrats would ensure a bigger stimulus package. That would boost riskier assets like Bitcoin further higher.
Long-term speculators have already started purchasing the cryptocurrency against their cash reserves. Software firm MicroStrategy leads the pack with a $425 million worth of reallocation to Bitcoin. Simultaneously, global payments firm Square has also unveiled its $50 million investment into the cryptocurrency in its balance sheet.
The possibilities of more firms joining the Bitcoin bandwagon have also surged after PayPal’s foray into the cryptocurrency space. The payments giant will enable its users to buy, sell, store, send, and spend Bitcoin via its existing services.
Meanwhile, traders with a short-term outlook are attempting to make profits by trading Bitcoin against the stimulus uncertainty. An optimistic move towards the deal prompts them to open intraday Long positions on the cryptocurrency, while a pessimistic approach leads to a more Short sentiment.
Bitcoin’s dip of Friday appeared because of the short-term traders. The cryptocurrency, meanwhile, stayed on an upward course as it attempted to establish a concrete price floor at or above $12,750. Trader Michaël van de Poppe weighed:
“As long as $12,750-12,800 holds, I think $13,500 is next. But if it doesn’t hold as a pivot, I assume the price drops further down toward $12,200 and potentially $11,900.”
Meanwhile, the post-stimulus outlook for Bitcoin envisions the price anywhere above the $15,000-level. Logan Han, a market analyst, said:
“Lower $12K region is a historically crucial price range for Bitcoin. If BTC manages to take a leap here and reach $14K, there’s nothing stopping BTC from going straight to $20K.”
Bitcoin was trading at $12,950 at the time of this writing.