Bitcoin depreciates – are BTC bears gaining the upper hand?

Bitcoin is steadily depreciating – are the BTC bears gaining the upper hand again?

The days-long sell-off in the bitcoin market is intensifying. On Thursday, Treasury yields rose as Federal Reserve Chairman Jerome Powell did little to ease fears over the recent surge in Treasury bond sales.

At the Wall Street Journal Jobs Summit, Powell reiterated that the US economy is far from reaching maximum employment. He spoke of keeping interest rates at near-zero levels – but did not address whether the central bank would buy more long-term Bitcoin Revolution government bonds each month to stem rising yields (which some economists thought was possible).

„With respect to the bond market, I would be concerned about disorderly conditions in the markets or a continued tightening of financial conditions in general that would threaten the achievement of our objectives,“ Powell said.

Wall Street & Bitcoin fall

Bitcoin turned lower after Powell’s comments, with the downward sentiment accelerating in the US afternoon. The benchmark cryptocurrency slid 3.97 percent to $47,543 on Thursday and saw further declines during the early Asia-Pacific session on Friday. At its intraday low, the bitcoin-to-dollar exchange attracted bids worth $46,219.

Elsewhere in the cryptocurrency market, almost all the top tokens posted big intraday losses on a 24-hour adjusted time frame. Chainlink, Polkadot and Binance Coin fell in the 9-11 per cent range, while Ethereum – the second largest cryptocurrency – fell around 6 per cent.
Bitcoin fails to extend its recovery rally due to unsupportive macro catalysts. Source: BTCUSD on TradingView.com

Tech darlings on Wall Street that used to support bitcoin were also in a sea of red. Cathie Wood’s ARK Innovation ETF, which primarily promotes tech stocks, plunged 5.3 percent. Meanwhile, shares of carmaker Tesla fell 4.9 per cent.

The technology-heavy Nasdaq Composite Index slid 2.1 per cent overall.

Money instead flowed into assets that had performed poorly during last year’s coronavirus pandemic. These included the energy sector of the S&P 500, which rose 2.5 per cent. The US dollar also rose higher.

Bitcoin tends to react negatively when the greenback strengthens.

More bearish tailwinds for Bitcoin came from rising government bond yields. Yields on 10-year US Treasuries jumped 7 basis points to 1.55 per cent after Powell’s speech. They climbed further during early Asian trading, adding another 2 basis points to reach 1.57 per cent.

Eric Winograd, a senior economist at AllianceBernstein, expects the Fed to intervene if yields on longer-term Treasuries rise above certain thresholds. He expects bond yields to move higher but slowly in the coming quarters.

Positive outlook

On-chain indicators continue to point to growing bitcoin accumulation sentiment. CryptoQuant CEO Ki-Young Ju writes that over 12,000 bitcoin have moved from Coinbase to wallets.

„Institutions are still accumulating BTC in the $46,000-$48,000 range,“ he added.