Bitcoin Dips Alongside Risky Assets amid Bond Market Sell-Off

Yerevan (CoinChapter.com) — Bitcoin continued to trade alongside riskier assets as traders’ focus shifted on an ongoing sell-off in the US bond market.

The benchmark cryptocurrency was down 1.58 percent to $57,995 ahead of the New York opening bell Thursday. Its intraday rally, which had the price climb to as high as $59,576 during the Asia-Pacific session, prompted traders to secure their short-term gains.

Bitcoin’s rally surfaced on Wednesday after the Federal Reserve pledged to maintain its easy-money policies. In a press conference after the US central bank officials’ two-day meeting, chairman Jay Powell said that they would keep interest rates near zero until 2023 while purchasing $80 billion worth of government bonds and $40 billion worth of mortgage-backed securities every month.

Bond Sell-Off

Investors continued to sell US 10-year Treasury notes in a bet that inflation would rise as the economy recovers, decreasing their value of returns from fixed-income investments. On Thursday, the yield on 10-year Treasury notes inched higher to 1.641 percent after closing the previous session at 1.641 percent, its highest level in more than a year.

Of late, the rise in bond yields has curbed investors’ appetite for assets that performed extremely well during the coronavirus pandemic in 2020. As a result, the capital flows out of technology stocks, gold, and US bonds and is entering weaker sectors like airlines, banks, and energy. The Fed said that it expects the US economy to recover faster than expected, bolstering those bets.

Meanwhile, Bitcoin stands in the middle as a totally uncorrelated asset. The cryptocurrency risks being overvalued after its 1,500 percent rise since March 2020’s low of $3,858. Nevertheless, it is also emerging as an anti-inflation asset in the corporates’ portfolios, with Tesla, MicroStrategy, and Square already treating the cryptocurrency as a store-of-value alternative to cash.

Financial giants like MasterCard, Bank of New York Mellon, Goldman Sachs, and Morgan Stanley have announced that they would roll-out bitcoin-enabled services into their existing platforms, further validating the cryptocurrency’s growing prominence on Wall Street. That has also prompted retail traders to turn into long-term holders.

Bitcoin FOMO

Many analysts think Bitcoin would log another record high above $60,000 due to its so-called institutionalization. Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, said in his analysis that the cryptocurrency would hit $100,000 by the end of this year.

“Fed [officials] are trying to stick to no-tightening for the next three years, but the market is trying to challenge that,” said Michael Matthews, a fixed-income fund manager at Invesco. “Risk assets will remain supported, providing Treasurys don’t sell off too much.”

The market anticipates that the Fed would intervene if 10-year Treasury note yields surpass their inflation target of 2 percent.