Bitcoin is falling as government bond yields and the dollar rise again


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Bitcoin (BTC) price struggled to break above $ 51,000 on March 8 as U.S. Treasury bond yields rise again while the U.S. Dollar Index (DXY) hits its highest level in over three months.

The global stock market, including stocks in the US and Asia, has retreated in parallel as US Senate approval sparked inflation fears.

BTC (orange) vs. DXY (green) vs. Treasury Yield (blue). Source: trade view

Why is Bitcoin falling out of fear of inflation?

As the world market analyst Holger Zschaepitz explained, the bond market got into turmoil when the yield on 10-year US government bonds rose to 1.6% after the economic news was published.

The instability in the bond market, of course, led to a sell-off of risk-weighted assets affecting both stocks and cryptocurrencies. The analyst wrote:

“Bond turmoil continues as US yields climb to nearly 1.6% for 10 years as the US $ 1.9 billion fiscal package alongside robust Chinese trade data fuels inflation fears.”

The yield on 10-year US Treasuries. Source: Bloomberg

Stocks and Bitcoin have seen a tightening correlation in the past few weeks, likely due to the increasingly unfavorable macro landscape.

Peter Brandt, a longtime futures and forex trader, said he saw a lot of connections over the course of his career. However, he said that correlations can also end “dramatically”.

Therefore, Bitcoin could move in parallel with stocks for the foreseeable future as markets react negatively to rising government bond yields. Over longer periods of time, however, Bitcoin’s bull run could intensify and gain momentum as the correlation weakens. He said:

“During my 46 years of trading, I’ve seen MANY sacred correlations come and go. Gold versus Yen or USD or stocks. Silver versus gold. Interest rates versus stocks or gold. BTC versus whatever. Et al. When those correlations when they’re too Often times end dramatically. Study each market with its own chart. “

Still, March could turn out to be a slow month for BTC trading with low volatility.

Is there a bigger drop coming?

If the traditional market falls, traders expect a wider Bitcoin pullback in the near future.

The price of bitcoin with key levels. Source: Loma, TradingView

For example, pseudonymous cryptocurrency trader Loma said a short-term decline to $ 48,000, a key level of support, cannot be ruled out if the old markets remain weak. He wrote:

“The base is still forming, I like the way everything is playing out. Only concerns are temporary market correlations. So if we do a dump tomorrow, I would expect a revisit of the lows, or at least the EQ at ~ $ 48,000 on it is easy to trade and focuses more on $ BTC and $ ETH. “

This week, the key for Bitcoin is whether the DXY will see a retreat after a week-long rally, giving the risky market room for a relief rally.

BTC / USDT volume support / resistance levels (Binance). Source: material indicators

As Cointelegraph previously reported, the Treasury’s return is also approaching a major resistance area and if rejected, Bitcoin could regain momentum in the short term, bouncing above the next major resistance areas at $ 52,000 and $ 53,000, respectively.