The sense of profit-taking continued to disrupt the Bitcoin market as the cryptocurrency fell for three consecutive days.
The BTC / USD exchange rate fell to 4.33 percent on Tuesday to hit an intraday low of $ 53,221. The pair’s downward move came as part of a broader downward correction that started after it updated its biggest high to $ 61,778 on Saturday (Coinbase data). Overall, BTC / USD fell 13.87% in relation to the referred peak level.
Bitcoin maintains support close to the lower trend line of Rising Wedge, the 20-day moving average. Source: BTCUSD at TradingView.com
Stocks, bitcoin break correlation
Bitcoin’s most recent dip contrasted with traditional markets. In the United States, stocks registered closing records on Monday, with the S&P 500 benchmark advancing 0.6 percent, reaching its all-time high of 3968.94. The tech-savvy Nasdaq Composite also rose 1 percent to 13,459.71, but failed to register a new high like the S&P 500.
Meanwhile, the blue-chip Dow Jones rose 0.5 percent to 32953.46 to post its 14th record closing of the year.
Bitcoin has formed a positive correlation with said Wall Street indices. Cryptocurrency was among the remaining assets that grew against an environment of lower debt yield. However, with yields recovering sharply, investors decided to return to the safety of the US dollar, causing Bitcoin and other pandemic winners to fall further.
Yield on the 10-year U.S. Treasury note fell 0.02 percentage points on Monday, but remained close to its 13-month peak above 1.64 percent, set on Friday. The US dollar rebounded against a basket of major foreign currencies, closing 0.16 percent higher, which also took some shine off the Bitcoin market.
Fed Meeting in Focus
A two-day meeting of the Federal Open Market Committee panel, which ends on Wednesday, will attract scrutiny from Bitcoin traders after a strong reversal in the Treasury market. While rates remain low by historical standards, their dramatic increase has recently raised concerns about the Federal Reserve’s dovish policies.
The US central bank has been buying government bonds and mortgage-backed securities at a rate of $ 120 billion a month. Meanwhile, it keeps reference interest rates close to zero, making it cheaper to borrow the US dollar. Higher purchases of bonds reduced the call to insure debt by lowering yields, while cheaper dollar loans pushed the dollar down.
Bitcoin has benefited the most from ongoing policies. The cryptocurrency rate has risen more than 1,500 percent since its mid-March nadir of $ 3,858. That’s why the Fed’s next policy-setting meeting could be instrumental in determining its short-term bias.
“The meeting is likely to dictate where yields and risks will be traded for days, if not weeks ahead,” said Jim Reid, research strategist at Deutsche Bank. “Chair [Jerome] Powell is likely to emphasize that significant uncertainties remain and that the recovery still has a long way to go, especially in the labor market. ”
A dovish signal from the Fed would benefit Bitcoin, as more investors would choose it as their safe haven against low bond yields. Meanwhile, many analysts believe that part of the stimulus to the $ 1.9 trillion coronavirus by US President Joe Biden would also enter the cryptocurrency market.
“Many of the stimulus checks go to young people who want to buy bitcoin, ”Said Mike Novogratz, CEO of Galaxy Investment Partners, in an interview with CNBC.