Bitcoin’s long-running bull market faces significant risks as U.S. Treasury yields rise to multi-month highs.
Bitcoin (BTC) has enjoyed a strong rally in recent years, soaring from a low in 2022 to an all-time high of $108,000 in December.
The cryptocurrency is benefiting from multiple tailwinds, including increased ETF inflows, with total inflows currently exceeding $35 billion. Companies like Semler Scientific, MicroStrategy, and Marathon continue to accumulate more Bitcoin.
At the same time, Bitcoin mining difficulty and hash rate reached an all-time high. Exchange balances have fallen to their lowest levels in years, creating favorable supply and demand dynamics.
However, Bitcoin and stocks face significant risks as U.S. Treasury yields rise following the Federal Reserve’s recent decisions. The Fed cut interest rates by 0.25%, bringing the total annual rate cut to 1%. The committee also said it expects two more rate cuts this year to be fewer than expected.
Technical indicators suggest that US yields are poised for a rebound. As shown below, the U.S. 30-year Treasury yield has formed a near-perfect inverted head-and-shoulders chart pattern, a popular bullish reversal signal. If this pattern holds, the next resistance level will be at 5.175%, the highest since October 2023.
Rising bond yields negatively impact risky assets such as stocks and Bitcoin due to sector rotation. For example, money market fund assets rose from $5 trillion in 2020 to $6.83 trillion as investors shifted to safer assets.
Conversely, risky assets like Bitcoin tend to perform better when bond yields fall, as investors diversify their portfolios away from bonds.
Technical analysis of Bitcoin price
However, in the short term, there are a number of tailwinds for Bitcoin price that could push it to an all-time high of $108,000. For example, investors could benefit from the January effect, where investors buy back assets after the Christmas holidays.
Bitcoin could also benefit ahead of the $16 billion FTX distribution and changing of the guard at the Securities and Exchange Commission.
On the technical side, Bitcoin appears to be consistently above the uptrend line and has substantial support. Additionally, the MVRV metric continues its upward trend while remaining above its 50-day moving average. Therefore, Bitcoin is likely to rise during the first quarter, but may stall or retreat in the second quarter.
