Key Talking Points:
- Rising bond yields keep the USD supported as market sentiment turns negative
- BTC/USD looking vulnerable to further downside pressure
As more and more public figures embrace higher valuations for cryptocurrencies in the coming future, Bitcoin has fallen victim to the wider sell-off in financial markets. The coin has struggled to recover upside momentum since the strong bearish run that started early last week, being unable to hold steady above 50,000 USD since then. The attempted push higher throughout the course of this week has lost steam, and Bitcoin buyers are currently being overpowered by a surge in bearish sentiment sparked by a rapid increase in bond yields.
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BTC/USD Daily chart
BTC/USD is now hovering around an area (45,965) that has provided some support in the past, but recent price action has seen this level broken a few times, so further downside pressure towards the 40,000 mark is still possible.
It is hard to identify key levels with high-volatile assets like cryptocurrencies but the daily BTC/USD chart suggests that a good area of support could be the 42,000 area, which has previously acted as resistance and has seen recent selling pressure bounce off just above it.
Aside from overall market trends, Bitcoin continues to be highly regarded in the investment community, and short-term valuations continue to suggest price will be above the 100,000 mark before the end of the year. An increase in speculative traders looking for greater returns as bond yields diminish the power of stocks, plus an attempt at wider adoption of cryptocurrencies as means of payment may indeed lead the price of Bitcoin higher in the next few months, but short-term corrections are not to be ignored given their magnitude with regards to such a volatile asset.
For now, focus is likely to remain on economic data coming out of the US, with Non-Farm Payrolls being the main focus of today’s session. If investors remain concerned about the rise in inflation and the lack of action from the Fed, the US Dollar will likely remain supported in the short-term, suggesting that BTC/USD may see accelerated downside pressure before a recovery is in order. If so, watch out for a drop below 40,000 as a signal of trouble given that the next area of significant support is not until the 30,000 mark.
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— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin