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Bitcoin (BTC) is trading flat on Friday morning after a 5% drop. Analysts are now looking for more directional signs in US government bonds or government bonds.
The market value of the main kriptovalyutnogo dropped from $23,400 to $22,000 due to a delayed response to issues at crypto-friendly bank Silvergate. Since then, however, both bulls and bears have refused to lead the price action, keeping the cryptocurrency in a tight range of $22,150 to $22,700, according to CoinDesk data.
If Treasury yields continue their February gains, stocks like cryptocurrencies and tech stocks, and rising prices like gold, the frame play could end in a deep selloff. Rising bond yields are making borrowing more expensive, and traders are generally fleeing riskier assets for fixed income, as seen last year.
"Despite the ups and downs, the crypto remains extremely bullish as BTC remains above $23,000," Singapore-based QCP Capital said in a research note on Friday. "However, if stocks continue to decline and the dollar index and yields continue to rise, crypto prices may struggle to maintain these levels."
However, yields retreated slightly from multi-month highs set last week, easing pressure on riskier assets.
At press time, the 10-year Treasury yield was at 3.94%, down from last week's four-month high of 4.089%. The two-year rate, the most sensitive to expectations for a rate hike by the Federal Reserve, remained at 4.85%, up from a 16-year high of 4.94% on Thursday.
The pullback comes as Atlanta Federal Reserve Chairman Rafael Bostick struck a more hawkish tone on Thursday, calling for a cautious approach in raising interest rates to control inflation. The central bank has kept interest rates at 450 basis points from March 2022 to a range of 4.5% to 4.75%, reflecting the volatility of risky assets.
A bearish tone may cause interest rate traders to reconsider their recent interest rate assumptions. According to Fed Funds Futures, the Fed's top interest rate forecast for the next tightening cycle reached 5.5% last week, up from 5% four weeks ago.
“Besides the positive progress, the Fed's performance last week was fairly balanced. While the data sticks to a strong mantra that they are ready to keep inflation down until it proves inflation has returned to the target, he is also a bit cautious. At current market prices,” said David Brickell, director of institutional sales at crypto-liquidity network Paradigm, in the March 7 edition of the Macro Pulse newsletter.
"The Fed's Bostick probably captured this sentiment better when it said it would take a slow and steady course of action," Brickell said, pointing to further yield cuts.
One reason yields are expected to continue to fall is that hedge funds are betting on record high two-year government bond yields. Such an extreme position is often seen at important turning points. In other words, the product may be close to dispersal, which is a positive development for crypto and other risky assets.
“According to the CFCC, the US Treasury inventory position is now at an all-time high, higher than the levels seen at the end of October 2018. US yields have recently outperformed, and the main focus here is the rise in yields given the negative impact on risk and crypto. Brickell said.
However, the output direction will focus on Fed Chairman Jerome Powell's remarks before Congress on Tuesday during his semi-annual testimony, and more importantly Friday's payrolls report and inflation data due on February 14.
Powell is likely to reiterate his commitment to fighting inflation by raising interest rates. However, since interest rate expectations have been reviewed earlier, the tough talk is unlikely to have much impact on the market.
"This is a high market value for Powell," Brickell tweeted. "He's talking to Congress and he needs to pay more attention to the damage."