Bitcoin prices slipped lower Thursday after hitting a sessional high above $38,000 during the Asian trading session, pointing to a weakening intraday demand in the West against a stronger US economic outlook.
The benchmark cryptocurrency logged a weekly high near $38,769 on US-based exchange Coinbase. Nevertheless, the early morning pump weakened as traders started profit-taking the higher levels. The downside pressure mounted entering the European session and is looking the same after the US open ahead.
Apprehensively, the dump today was similar to Bitcoin’s upside rejection on Friday around the same $38,000 level. Back then, an open endorsement from the Tesla and SpaceX founder Elon Musk sent the cryptocurrency higher from $32,000 to $38,000, which followed a quick retracement, pointing to traders securing their intraday profits.
The latest retest merely hinted at repeating the same bullish-to-bearish reversal, with sights at the 50-period moving average (blue) as support. Fundamentals support the short-term downside scenario.
The US dollar And Bond Yields
A recent recovery in the US dollar value dented demand for safe-haven assets. It is important to notice that Bitcoin was looking trapped inside the $30,000-32,000 range until Musk’s endorsement woke up the bulls.
The US dollar expects to stretch its short-term recovery period further as investors watch signs of faster-than-expected US economic recovery. Meanwhile, the vaccine rollout is prompting them to turn away from bubbled safe-havens like Bitcoin and gold. Cash seems like a better option.
That is visible in the bond market. The yields on the benchmark 10-year Treasury note the 30-year Treasury bond advanced to 1.139 percent and 1.927 percent, respectively. That marked a three-week peak for the 10-year note.
They rose after data released on Wednesday showed that private companies added 174,000 jobs in January. That was above the Dow Jones’ 50,000 payrolls estimations.
Rising yields tend to weigh Bitcoin lower—and vice versa—as the market has witnessed during 2020.
Long-term Sentiments Favor Bitcoin
The dollar is likely to face a lagging downside pressure after the US government passes its third coronavirus stimulus package. One still cannot predict its size over a lack of bipartisanship in a tied Senate.
But economists agree that President Joe Biden’s proposal to pass a $1.9 trillion aid has more chances over the Senate Republicans’ trimmed down the $603 billion-proposal, given Vice President Kamala Harris—a Democrat—has the final vote should there be a hung assembly.
In either case, the stimulus would likely act as a tailwind to the dollar’s medium-term downtrend. Despite its latest recovery, the greenback is down about 11.5 percent from its mid-March peak.
Bitcoin bulls see it as an opportunity to send the prices above $40,000, $50,000, and so on.