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Bitcoin rose 11% last week, hitting a high comparable to July. However, some analysts say macroeconomic headwinds could quickly undermine this bullish momentum.
U.S. Treasury yields, Bitcoin threat
Yuya Hasegawa, an analyst at Japan's BitBank, sounded the alarm about the evolution of the U.S. bond market. He said rising U.S. Treasury yields are “a concern for Bitcoin in the near term.”
In fact, when bond yields remain high, they tend to become more attractive than assets considered riskier, such as Bitcoin. This phenomenon could lead investors to abandon cryptocurrencies in favor of US bonds, which are perceived to be safer.
In mid-October, the yield on the 10-year US Treasury fluctuated between 4.02% and 4.08%, high enough to make it an attractive alternative to crypto assets.
Additionally, recent stronger-than-expected U.S. economic data has reignited concerns about the Federal Reserve's monetary policy. Better-than-expected retail sales and a decline in jobless claims raise questions about how quickly the Fed will ease interest rate policy.
There is still a chance of a November interest rate cut
Despite these concerns, Hasegawa believes there is still a “good chance” the Federal Open Market Committee (FOMC) will choose to cut rates by 25 basis points at its early November meeting. This view appears to be shared by the majority of traders, with just 9% expecting U.S. interest rates to remain where they are.
The recent decision by the European Central Bank (ECB) to cut its key interest rate by 25 basis points may also support Bitcoin prices in the short term. “This rate cut should increase market liquidity and improve the performance of risk assets such as Bitcoin,” said BRN analyst Valentin Fournier.
The combination of significant inflows into Bitcoin ETFs and favorable macroeconomic catalysts suggests the potential for significant price upside. Fournier even envisions a scenario where Bitcoin could reach $70,000 by Monday if it avoids the weekend rejection.
In conclusion, although macroeconomic challenges persist, particularly regarding bond yields and Fed policy, Bitcoin appears to be benefiting from generally favorable conditions in the short term. However, investors need to remain cautious in the face of potential disruption in the coming weeks.
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Disclaimer
The views, ideas and opinions expressed in this article are solely those of the author and should not be construed as investment advice. Please do your own research before making any investment decisions.
