Bitcoin entered bias conflict during the Wednesday session as traders’ focus shifted to the ongoing sell-off in the US bond market ahead of the Federal Reserve’s forward guidance on the US economy.
The benchmark cryptocurrency was wobbling above and below the $55,000-level as the market headed for the US session, only three days after establishing a lifetime high above $61,000. Traders appeared to have secured their profits at the sessional top, anticipating a lessened demand for Bitcoin as it faced uncertainties from the macroeconomic landscape.
Yield Fears
Of late, the cryptocurrency reacted heavily to the fluctuations in the US bond market. The BTC/USD exchange rate dropped by more than 21 percent in the final February week, just as the yield on the 10-year US Treasury note surged to its 13-month record high. It reached 1.67 percent on Wednesday as investors sold the debt.
Rising interest rate returns on bonds made the US dollar attractive. That reduced appetite for riskier assets, especially the so-called pandemic winners—financial assets that benefited from the coronavirus lockdown. In turn, tech stocks and bitcoin fell and rebounded almost in tandem as yields fluctuated.
The US dollar rose from 89.87 at the start of this year to 91.92 on Wednesday.
Federal Reserve officials will release their latest economic projections at 1400 ET. Economists expect them to envision a faster-than-expected rebound labor market and inflation. The central bank has committed that it would continue its open-ended bond-buying program and lower interest rate policy unless it achieves maximum employment and inflation rate above 2 percent.
Money managers have started assuming a rise in inflation, leading to a sell-off in government debts. Bitcoin is reacting to the same by turning lower in the short-term.
Bitcoin Technical Outlook
Technically, the cryptocurrency looks poised to undergo further sell-offs — a breakdown move that could lead its prices below $50,000 in the coming sessions.
So it appears, the BTC/USD exchange rate is trading inside a descending triangle structure. The pair expects to rebound from its lower trendline but has a limited upside scope. As the uncertainty over the Fed’s future guidance grows, leading to further rise in bond yields, bitcoin could break below the Triangle support to test $53,500 as its interim downside target.
Meanwhile, the one-day Bitcoin chart shows the price testing its 20-day moving average as support.
A further decline risks BTC/USD crashing towards the next downside target near the 50-day moving average. It sits around $47,500.