Bitcoin wobbled between gains and losses on Wednesday as traders gauge sell-off signals on the chain against the decline in benchmark bond yields.
The flagship cryptocurrency was up about 0.5 percent to $ 34,335 ahead of the opening bell in New York. It traded at $ 35,233 on the Coinbase exchange at its all-time high, indicating bullish attempts to register another bull run towards $ 40,000.
Bitcoin feels bearish sentiment under $35,000. Source: BTCUSD on TradingView.com
Fundamentals supported a choppy view of the cryptocurrency market.
Benchmark bond yield is getting lower
The yield on the US 10-year Treasury fell after climbing for seven days in a row. Profits emerged during a new bond auction that attracted strong demand from dealers (not investors). They raised most of $ 38 billion in new government debt, covering 20 percent of the securities. Yields fall when bond prices rise.
Strong demand at an overnight auction of $ 38 billion of 10-year notes and moderate comments from Federal Reserve officials began to give SAP momentum following the recent surge in US treasury yields.#XAUUSD #GOLD #DXY
– Alice CFA 🎓 (@canduys) January 13, 2021
Bitcoin traded higher as long-term bond yields remained below 1 percent after the March 2020 route. Traders expected the Federal Reserve’s commitment to buy government debt to support the US economy would send mainstream investors in search of better returns in the cryptocurrency market.
That became somewhat true as billionaire investors want Paul Tudor Jones and Stan Druckenmiller, in addition to regular companies, including MicroStrategy, Ruffer Investments, Square, etc., put their capital in the Bitcoin market. That helped the cryptocurrency emerge as an alleged safe haven.
But with returns above 1 percent, especially as President-elect Joe Biden is increasing government spending along with economic growth, Bitcoin’s potential to defend another upward run seems meager in the near term.
US 10-year bond yields dropped two days in a row. Source: US10Y on TradingView.com
Meanwhile, many analysts note that the Fed would limit government bond yields because of its commitment to support the US economy. The central bank would buy bonds indefinitely until they reach an inflation rate of more than 2 percent and maximum employment.
“I don’t think we will see rates go up much higher as there is still a lot of demand”, said Altaf Kassam, Head of Investment Strategy for State Street Global Advisors in Europe. Meanwhile, he noted that additional stimulus outlook would protect riskier assets.
That could be Bitcoin given its shoulder-to-shoulder gains with the global stock market in 2020.
On-Chain Bitcoin Data Is Disappointing
While the long-term outlook for Bitcoin remains stronger, the short-term bias puts forward eerie views.
Ki-Young Ju, the chief executive officer at CryptoQuant – a South Korea-based blockchain analysis platform, noted that the outflows of Coinbase Pro, a US-based digital asset exchange that trades Bitcoin over-the-counter, fell significantly .
“Miners sell, not significantly stablecoin inflow, no Coinbase outflows, and 15k BTC flowed into exchanges since yesterday, ‘Mr Ju said Tuesday. “We may have a second dump. “
Grayscale Investments, a New York-based trust trading Bitcoin, has also stopped reporting their cryptocurrency purchases since December 25. The company was responsible for creating a supply crisis after it raised 572,644 BTC in total.
Grayscale Bitcoin Trust holdings. Source: ByBt.com
“When inflows start to come in, indicating institutional demand, Bitcoin could rise again,” said market analyst Joseph Young. “Worth watching.“
Grayscale reopened on Tuesday after the holidays.