Bitcoin retained its technical support area despite a worrying sale on Tuesday, raising hopes that it could survive the bearish attack that brought its prices down by 21.32 percent last week.
The benchmark cryptocurrency reported initial gains on Wednesday, rising up to 2.72 percent to $ 49,470, after recovering from its 20-day exponential moving average support. Its bullish movement followed small volumes, warning bulls to wait for confirmation before extending its bullish trend.
Bitcoin keeps the company
Tuesday was about profit making. Bitcoin’s wild bullish move of 9.74 percent at the start of this weekly session prompted traders to minimize their risks. The concern that the Federal Reserve would raise its benchmark interest rates in the wake of the increase in Treasury yields has led investors to money security. US stocks also reacted negatively to investor anxiety.
Bitcoin maintains its weekly bullish configuration with the calm of rising yields. Source: BTCUSD at TradingView.com
The U.S. Treasury’s 10-year yield rose to 1.6 percent last week, its best level in a year, raising questions among investors about higher inflation and borrowing costs. Meanwhile, real US yields, which are adjusted according to inflation expectations, have also increased, as investors expect President Joe Biden’s $ 1.9 trillion coronavirus stimulus package to fuel powerful growth prices in the USA.
Bitcoin does not provide interest payment flows. Therefore, it tends to underperform in terms of increasing yields – the same as gold. However, with rising yields showing signs of easing, the cryptocurrency is regaining its bullish bias.
Fed intervention
The rise in Bitcoin prices on Wednesday was also suggested by Lael Brainard, one of the Washington-based Federal Reserve governors, who gave the first big hint about the central bank’s potential intervention in the current liquidation of the bond market.
Ms. Brainard warned market participants that the Fed is far from starting to slow its expansionary policies, noting that she would be concerned if she sees any “disorderly conditions or persistent tightening and financial conditions” that could harm the Fed’s goals.
“The economy remains far from our targets in terms of employment and inflation, and it will take some time to achieve substantial progress,” explained Ms. Brainard. “We need to be patient to achieve the results set out in our guidance.”
She noted that the Fed would continue its bond-buying program in a near-zero rate environment. What’s more, any rate hikes – if they occur – would be gradual to guarantee minimal volatility in all securities and the stock market.
The US Treasury’s 10-year yield fell to 1.393 Tuesday night after Brainard’s comments. U.S. stock futures soared, indicating an optimistic start when the market opens on Wednesday.
“They are likely to respond through treasury purchases on 10, 20 or 30 year bonds, as these fees can hurt corporations more,” said Ben Lilly, author of the ChainPulse newsletter with a focus on cryptography. “And in the medium and long term, this is great for bitcoin … At the expense of some short-term pains.”