Key Takeaways:
- The US 10-year and 2-year bond yields are showing signs of bottoming out.
- The occurrence has historically impacted other markets.
- Bitcoin price might witness bullish times due to correlation.
NEW DELHI (CoinChapter.com) — Here’s an interesting one: The US 10-year-2-year bond yield spread is showing signs of bottoming out, and the occurrence might impact Bitcoin prices.
A financial analysis account on X, filbfilb, highlighted the occurrence, noting the impact of the previous two bottoms on gold and stocks. A yield spread refers to the difference between the yields of differing debt instruments with varying maturities, credit ratings, issuers, or risk levels.
A change in yield spreads often signals changes in the underlying economy or financial markets.
The post noted that since 1999, the 10-year-2-year yield spread has bottomed out twice. Both times gold prices registered massive gains, the first time rallying 50% after 2001 and then a 100% bull run in 2007.
Stocks, represented here by NASDAQ 100, had an opposite fate. Each time the yields bottomed out, stock prices tumbled, dropping -68% after the first bottom and -50% after the second (in the extreme).
As such, with indications of the 10-year and 2-year yields forming a bottom, the historical pattern might repeat.
So, What’s Bitcoin Price Got To Do With This?
Due to the token’s widespread adoption by institutional investors, Bitcoin prices have started becoming strongly correlated with the traditional financial markets.
The above chart shows Bitcoin’s correlation with gold, the NASDAQ Composite, and the S&P 500. A value below 0 would mean a negative correlation, while a positive correlation indicates prices of both assets will move in lockstep.
Interestingly, Bitcoin’s correlation with gold turned positive in October. It is likely that the Israel-Hamas War has affected the markets. Furthermore, recent comments from the US Federal Reserve chair Jerome Powell likely attracted investors to risk assets like Bitcoin.
On the other hand, the S&P 500 has recently been in a downtrend.
Given gold’s reaction to the bottoming out of the 10-year-2-year yield spread, the news becomes bullish for Bitcoin if its correlation with gold prices remains positive. However, bulls would likely hope the token’s correlation with stocks remained negative or lower than the BTC-gold correlation.
BTC Price Eyes $31,000 As Bulls Ignore RSI Risks
Meanwhile, BTC price dropped below $30,000 on Oct. 23 before bulls pushed the token back above the hallowed price level. Despite multiple trysts above the $30,000 price tag, Bitcoin has failed to sustain a rally above the price level for over a few weeks since June 2022.
BTC price rallied 3.6% on Oct. 23 to reach a high near $30,988 before bears pared gains. The bears defend the $31,000 price, while the bulls want to push Bitcoin above it. However, the overbought RSI level, with a score of 77.59 on the daily charts, adds to the bearish cues against the BTC price.
Traders consider overbought RSI levels a selling signal since the occurrence often precedes a correction or reversal phase for a token. If the selling continues, the BTC price might drop to the support near $28,900
Furthermore, a breakdown below the immediate support might force bulls to defend the support near $27,350. Traders could enter short positions after a definitive break below the immediate support level.
BTC’s 50-day EMA (the purple wave) needled above the token’s 100-day EMA (the blue wave), forming a bullish pattern called the golden cross, which could attract buyers to the market and help BTC price reach the resistance near $31,260.
Breaking and consolidating above the immediate resistance could help Bitcoin price target the resistance near $32,670, which could become a target for long positions once BTC breaks above the immediate resistance.
