Bitcoin (BTC) is currently experiencing a period of consolidation near its record highs. While this could be seen as a normal pause in a bull market, some analysts are concerned that recent macroeconomic developments could hinder further growth.
“Macro factors are posing a threat to Bitcoin’s(BTC) momentum,” said Chang, a crypto options trader and market analyst, in a CoinDesk interview. He highlighted the volatility in bond yields, particularly driven by weak demand compared to the issuance of U.S. Treasuries. “If there’s a negative impact on Bitcoin, it’ll likely stem from yields and the dollar index,” he added.
Rising Treasury yields are a major concern. The yield on the benchmark 10-year Treasury has shot up 24 basis points to 4.55% in just two weeks, according to TradingView. Traditional market analysts warn that a breach above 4.7% could trigger significant volatility in stock markets.
Higher yields generally translate to increased borrowing costs, making riskier assets like Bitcoin and tech stocks less attractive. Chang anticipates continued volatility in yields throughout June, potentially leading to a tighter correlation between Bitcoin and stocks.
The allure of safe investments like government bonds is also a factor. With the two-year Treasury yield nearing 5%, macro traders might be tempted to reallocate capital away from stocks, cryptocurrencies, and other riskier asset classes.
“We’ve reached a point where further increases in bond yields will likely weigh heavily on all asset classes,” commented Peter Oppenheimer of Goldman Sachs on Bloomberg Surveillance.
Traders are now keenly awaiting the release of the personal consumption expenditures (PCE) price index on Friday. This data, the Fed’s preferred inflation gauge, could provide crucial insights into the direction of interest rates.
A higher-than-expected inflation reading could weaken the case for further rate cuts, potentially pushing bond yields even higher. As of now, Fed funds futures suggest that investors are only anticipating 35 basis points of rate cuts in 2024.
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Bitcoin’s price trajectory will likely hinge on the interplay of these macroeconomic factors. The upcoming PCE data and subsequent Federal Reserve pronouncements will be closely watched in the coming days.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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