Weak start for previously strong BTC – bearish days ahead?

Bitcoin Weekly Outlook: Weak start for previously strong BTC – bearish days ahead?

• Bitcoin posted a strong recovery during the weekend session, but looks weaker at the start of the new week.
• The cryptocurrency’s continued accumulation and the US government’s additional stimulus package are providing tailwinds to the price rally.
• Meanwhile, rising long-term Treasury yields are weakening Bitcoin’s appeal.

The bitcoin price retreated from its uptrend over the weekend amid the prospect of a Bitcoin Supersplit further rise in US borrowing costs.

On Monday, the BTC/USD exchange rate held support above $50,000 after retreating from its early Asian session high of $51,846. Its modest declines appeared to be due to profit-taking after Bitcoin ended the previous week up 12.71 per cent, according to data from Coinbase, a US-based crypto exchange.

Nonetheless, last week’s upward momentum came in response to Bitcoin’s bearish phase in the week ended 28 February, when it fell more than 21 percent, its worst seven-day performance since the coronavirus sell-off in March. The price action shows medium-term uncertainty among traders.

Fundamental forecast: Bullish

Bitcoin could correct lower to stay in price with its weekly choppiness. Traders are likely to realise their short-term gains in the face of macroeconomic uncertainty led by a dramatic rise in US Treasury bond yields.

Meanwhile, large firms that are bullish on Bitcoin in the long term could absorb the selling pressure from private traders.

Last week was the same. Bitcoin prices rose on Monday as the sell-off in the US government bond market calmed, but they were chopped off when Federal Reserve officials, including Chairman Jerome Powell, failed to provide a forward guidance for rising interest rates.

At one point on March 5, BTC/USD had fallen as low as $46,219 – down 12.24 percent from its previous weekly high.

On the same day, business intelligence firm MicroStrategy announced that it had bought $10 million worth of BTC at an average price of $48,888. The Nasdaq firm’s latest purchase has increased its net bitcoin reserves to 91,064 BTC, currently worth $4.63 billion.

It has made more than 100 per cent in profits so far from its relentless crypto purchases.

Two days later, Bitcoin (go to Plus500 Bitcoin buying guide) rose again. The cryptocurrency climbed to a value of $51,549 by March 7.

The Senate passed US President Joe Biden’s $1.9 trillion stimulus bill on Saturday after making adjustments to direct-pay provisions. Part of bitcoin’s bullishness was also triggered by the prospect of more US dollar liquidity in the system.

Yield effect

Meanwhile, Bitcoin is facing headwinds from a possible rise in US government bond yields. Interest yields on the 10-year Treasury bond rose to 1.607 last week – the best level since the pandemic began – before falling to 1.585 per cent on Monday.

With Powell’s decision to take a wait-and-see approach ahead of the Fed’s interest rate decision on 17 March, it looks like a lack of central bank intervention will continue to push up long-dated bond yields.