This week saw a considerable reversal in Bitcoin’s price, which declined from an all-time high of over $108,200 to dip below $95,000. This decrease was driven primarily by sustained apprehension regarding the state of the global bond market.
Bitcoin Price Drop Amid Rising U.S. Bond Yields
On Tuesday, Bitcoin plummeted sharply. This movement came in the wake of surging U.S. bond yields, which reached their highest standing in over two years. This increase was triggered by more robust than anticipated job vacancy data.
As the week went on, the selloff in the bond market continued, which pushed 30-year and 10-year yields to 4.95% and 4.70% respectively. The upward trend in yields implies that the market anticipates the Federal Reserve maintaining its hawkish stance throughout the entire year.
Future Impact on the Bond Market
The minutes of the Federal Reserve’s meeting on Wednesday and the announcement of nonfarm payroll numbers on Friday are expected to influence the bond market further. These events are likely to give more detailed perspectives on recent Federal Reserve operations and possibly shed some light on future monetary policies. As per Petr Kozyakov, CEO of Mercuryo, in a recent note on 8th January:
The market’s excitement over Bitcoin entering a new age where the US Central Bank would even hold a Strategic Bitcoin Reserve has considerably diminished. Instead, concerns over Bitcoins function as an ultra risk-on, risk off asset have resurfaced. This position comes with signs that the US Federal Reserve could keep interest rates higher for longer than was initially hoped.
Inflationary Pressures and Their Potential Impact
Some experts in the field have posited that bond yields could continue to rise. This outcome is based on the ongoing inflationary pressures resulting from policies implemented during Donald Trump’s administration. The policies singled out are deportations, tariffs, and a series of tax cuts. Moody’s Chief Economist, Mark Zandi, noted in a recent communique that these higher yields might have a negative impact on the stock and the crypto market.
Notwithstanding, legendary trader Peter Brandt remains optimistic about Bitcoin’s longer-term prospects. However, he also acknowledges the potential for temporary volatility due to the issues in the bond market. Brandt pointed out recently that Bitcoin appears to be tracing a head-and-shoulders pattern, which may indicate further instability.
Weekly Chart Suggests Possibility of More Bitcoin Price Gains
Observations on the weekly chart indicate a possible upside for Bitcoin in forthcoming weeks. The chart illustrates a cup-and-handle pattern, a formation generally associated with bullish continuation. Bitcoin broke away from the handle section in November and hit a record high of $108,200 in December.
At present, Bitcoin is establishing a bullish pennant pattern right below the crucial resistance level of $100,000. Such consolidations are usual precursors to significant upward movements near major psychological levels. The pennant is made up of a long vertical line followed by a triangle pattern, which signals a potential for a breakout.
With Bitcoin still trading above the 50-day moving average, it’s likely that the coin will experience a pronounced bullish breakout within the next few weeks. The prospect of a robust breakout unfolding in the weeks ahead, and possibly even before Donald Trump’s inauguration on January 20, will be of keen interest to market watchers. If this anticipated breakout occurs, it’s recommended to keep an eye on the critical target level of $122,000. This value emerges when measuring the depth of the cup and extending it from the point of breakout.
