Bitcoin prices plunged aggressively into the US trading session Thursday, with BTC/USD briefly breaking below its short-term support level at its 50-period moving average on a four-hour chart.
The pair touched an intraday low of $47,453.21 on Coinbase, a US-based crypto exchange, before retracing its way upward to reclaim the 50-MA support. Nevertheless, traders appeared biased towards an extended downside move, partially due to Federal Reserve chairman Jerome Powell’s dry response to the rising US government debt yields in a Q&A earlier Thursday.
Same Old Dovish Tone
Mr. Powell emphasized that the US economy is far from achieving maximum employment, hinting that the Fed would continue its asset purchasing programs and keep its benchmark lending rates near zero for an unforeseeable future. His comments did little in offsetting fears about the recent rise in bond yields, which indirectly kept Bitcoin from achieving greater price levels.
The yield on the 10-year US Treasury note jumped to 1.541 percent during Mr. Powell’s speech, putting itself on track for the highest closing level in a year. It was 0.915 percent at the start of this year. That led to a reduced appetite for the technology stocks, bitcoin, gold, and almost every asset that had surged last year against a low-yielding bond market.
Mr. Powell’s speech disappointed Bitcoin bulls, primarily when even top economists anticipated that the Fed chair might boost their bond-buying program to pressure the yields lower.
“Powell did not deliver,” said economist Alex Krüger. “Basically repeated his usual dovish lines, acknowledged treasury market is disorderly, yet indicated would not act on it yet — leading to continuation on the dollar up, bonds down, stocks downtrends. BTC dropped almost 4% on his speech.”
What’s Next for Bitcoin
Bitcoin developed a positive correlation with the US stock market as they both eyes bond yields for further directional clues. Even today, the plunge in the Bitcoin market coincided with a similar move across Wall Street stocks, especially tech shares.
The BTC/USD exchange rate now looks at the prospect of breaking bearish on its 50-4h MA support. If the pair does, then it risks extending its downtrend towards $46,000 or low — to test its 200-4H MA as the next pullback target. Thereafter, it could either add further losses towards the lower $43,000 levels or bounce back to reclaim the 50-4h MA, this time acting as resistance.