Bitcoin’s price retreated on Thursday along with US stocks and oil prices as US Treasury yields tapped some of the highest levels this year.
The 10-year Treasury note yield, which trades in the opposite direction from the price, breached 1.75% for the first time since January 2020. The increasing yield has been seen by investors as a sign of market inflationary concerns.
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In this landscape, bitcoin will serve as a good hedge against inflation, but some traditional investors still view it as a risky asset. Recently, commentators warned that higher bond yields (viewed as a safe haven by legacy investors) could reduce the appeal of potentially riskier assets like stocks and bitcoin. Of course, this remains to be seen and one needs to appreciate that investors will use all the tools in their arsenal to argue their position.
Bitcoin briefly touched $60,000 on Thursday but proved unable to hold that level. At the time of publishing, BTC exchanges hands just above $58,000 – which some analysts believe is a pivotal level that could spur additional growth.
At a press conference on Wednesday, Federal Reserve Chair Jerome Powell told reporters that he saw no need to react to rising Treasury yields.
The Japanese brokerage Mizuho recently estimated that some $40 billion of the latest round of direct $1,400 stimulus checks from the US government might be spent on bitcoin and stocks. The German lender Deutsche Bank published a report this week stating that bitcoin is “now too important to ignore” given its $1 trillion market capitalisation.
If recent financial history is an indication, anything short of monetary tightening cannot hinder bitcoin at this stage, and central bankers are more likely to double down on stimulus until the velocity of money picks up (post-lockdowns). Even then, it could be another 6-12 months before monetary tightening is even considered.
The unprecedented levels of stimulus have thus far served as a catalyst for bitcoin and other cryptocurrencies.
Ethereum ranges in the ether
Ether slid to$1,754 on Thursday, moving more or less in harmony with bitcoin. At press time, ETH trades at $1,803.
For the past couple weeks, the second-largest cryptocurrency has stayed in a range between $1,660 and $1,940.
The price is still well off the all-time high above $2,000 reached in late March.
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