According to data compiled by Bloomberg, the 30-day correlation between Bitcoin and the US 10-year Treasury yield stands at minus 53, marking one of the most negative readings since 2010. This metric suggests that the largest digital asset is currently moving inversely to the benchmark bond yield to an unusual extent.
The upcoming release of inflation data and Federal Reserve policy outlook, scheduled within hours of each other on Wednesday, could potentially impact bond markets. The correlation study indicates a risk of Bitcoin being influenced by the fluctuations in the Treasury market.
On Tuesday, Bitcoin experienced fluctuations, declining up to 3.2% to reach a one-week low, and stabilizing around $67,780 as of 8:38 a.m. in London. Concurrently, smaller tokens like Ether and the meme-crowd favorite Dogecoin also sustained losses.
While Bitcoin reached a record high of $73,798 in mid-March, driven by inflows into dedicated US exchange-traded funds, it has struggled to achieve new highs in the past three months. Tony Sycamore, a market analyst at IG Australia Pty, expressed concern over Bitcoin’s recent failed attempts to surpass all-time peaks, stating that it raises “alarm bells.”
Sycamore emphasized the significance of the next 36 hours, considering the lack of upward progress despite significant inflows into Bitcoin ETFs. Since their January launch, these ETFs have attracted a net $15.6 billion, although on Monday, $65 million was withdrawn from the products, breaking a streak of 19 consecutive days of subscriptions.
With inflation data expected to reveal price pressures exceeding the US central bank’s comfort zone, investors are now contemplating whether future Fed easing will entail only minor adjustments to policy, compared to the previously anticipated rate reductions. A prolonged period of higher borrowing costs could pose challenges for speculative assets like Bitcoin, which have witnessed significant growth since the beginning of 2023 following a severe bear market.
Technical analyst Katie Stockton from Fairlead Strategies LLC highlighted “neutral” short-term momentum for Bitcoin based on chart patterns, while asserting a more positive outlook for the long term.
Anand Gomes, co-founder of Paradigm, a derivatives platform, likened the crypto market to a “junkie” reliant on bullish news to maintain momentum, suggesting that in the absence of such news, the path of least resistance for Bitcoin is downward.
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