Bitcoin (BTC) struggled to surpass $ 51,000 on March 8 as US government bond yields rose again and the US dollar index (DXY) was at its highest in more than three months.
The global stock market, including stocks in the United States and Asia, contracted, as the US Senate approval of the stimulus measures raised concerns about inflation.
Why is Bitcoin cut short for fear of inflation?
As explained by global market analyst Holger Sschitz, the bond market has become volatile as the yield on 10-year US government bonds rose to 1.6% after the stimulus news was announced.
The instability in the bond market naturally led to the selling of risky assets, affecting both stocks and cryptocurrencies. The analyst wrote:
“Bond woes continue, with 10-year US interest rates hiking nearly 1.6% as the 1.9 ton US financial package, coupled with strong Chinese trade data, raises inflation concerns.”
The interest rate for the US government for 10 years. Source: Bloomberg
There has been a closer correlation between stocks and Bitcoin in recent weeks, likely due to the increasingly unfavorable macroeconomic landscape.
Peter Brandt, a longtime futures and currency trader, said he has seen many relationships throughout his career. However, he said the relationships could end “dramatically”.
Thus, Bitcoin could move in line with stocks in the foreseeable future as the markets react negatively to Treasury rallies. But over a longer period of time, bitcoin’s uptrend could gain momentum if the correlation begins to fade. He said:
“For 46 years. Trade I’ve seen many sacred relationships come and go. Gold versus yen, dollar, or stocks. Silver versus gold. Percentage versus stocks or gold. BTC against anything. Etc. After all, they often turn into Dramatic. Explore each market on its own schedule. ”
However, March could be a slow month for BTC, which is trading in low volatility.
Is there a greater decrease?
If the traditional market falls, it is clear that a broader Bitcoin drawdown can be expected in the short term.
For example, cryptocurrency trader Luma said the short-term decline to $ 48,000, an important support level, cannot be ruled out if older markets continue to show weakness. he wrote:
“The base is still forming, and I love the way things are. The only concern is the temporary old market correlations, so if we do a reset tomorrow, I would expect to revisit at least or at least an EQ of around $ 48,000. To trade, focus more on $ BTC and $ ETH “.
This week is a pivotal week for Bitcoin if DXY sees a pullback after a weekly rally, giving the risk market some room to rest.
As Cointelegraph previously reported, Treasury yields are also close to a major resistance area, and in the event of a rejection, Bitcoin could gain momentum in the short term to rise above the next major resistance areas of $ 52,000 and $ 53,000.