First Mover Americas: Bitcoin’s Price Bounce Stalls as 10-Year Yield Hits 32-Month High

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By Omkar Godbole

Bitcoin’s bounce from key price support stalled near $39,000 ahead of American trading hours as the futures tied to the tech-heavy Nasdaq 100 index erased a 1% gain and dipped into the red. Meanwhile, the yield on the U.S. 10-year Treasury note rose to 2.10%, the highest since July 2019, according to the chart platform TradingView.

The benchmark yield has risen by 40 basis points in seven days and nearly 60 basis points this year. The U.S. 10-year breakeven inflation rate reached a record high of 2.785% last week, per Federal Reserve Bank of St. Louis.

Historically, bitcoin has chalked up price rallies in an environment of rising inflation expectations and bond yields, according to Charlie Morris, CIO at ByteTree Asset Management.

However, dollar strength has emerged as one of bitcoin’s critical nemesis since the March 2020 crash and seems to be stopping the crypto from taking advantage of the ongoing rise in bond yields. The dollar index, which tracks the greenback’s value against majors, stood just under 99.0, having hit a 22-month high of 99.42 last week.

“If the dollar starts to ease, higher [bitcoin] prices will follow,” ByteTree’s Morris tweeted. A big dollar sell-off looks unlikely during the next 48 hours, as the Federal Reserve is expected to hike rates by 25 basis points on Wednesday.

Aside from the macro stuff, traders will closely watch the European Union’s (EU) vote on a draft of the proposed Markets in Crypto Assets (MiCA) framework, which could have widespread ramifications.

“The bill as it is currently framed would require miners to submit environmental sustainability compliance plans. Failing to submit them would prevent their operation within the EU. The implications of this are huge – the EU is a major jurisdiction for crypto mining and crypto more generally, with over 10% of global bitcoin hash power emanating from the region,” Simon Peters, market analyst at eToro, said in an email.

“While not on the scale of the China bitcoin mining ban, the implication for the price of BTC and other crypto assets which follow on price, could be significant in the next few days. The crypto asset market has been buffeted by events, and this could lead to another tough trading period if the legislation passes,” Peters added.

Bitcoin defended the weekly Ichimoku cloud support during the Asian trading hours even as a deteriorating coronavirus outbreak in mainland China pushed Hong Kong’s stock index to a six-year low.

A tweet by Tesla’s CEO Elon Musk that he won’t sell bitcoin, ether and dogecoin likely helped the top cryptocurrency remain resilient to sell-off in the Hong Kong stocks. The meme cryptocurrency dogecoin also witnessed a 10% spike, supposedly on Musk’s tweet.

By Omkar Godbole

Bitcoin’s put-call skews have come off sharply from the highs seen following Russia’s invasion of Ukraine on Feb. 24. It shows that demand for puts, or options offering downside protection, is now relatively weaker than two weeks ago.

In other words, fears of an extended decline have subsided, with bitcoin consolidating below $40,000 amid a continued decline in U.S. stocks.

The six-month put-call skew saw a brief dip below zero over the weekend, implying a relatively higher demand for longer duration calls, or bullish bets.

According to the institution-focused over-the-counter tech platform Paradigm, calls dominated the volume last week, accounting for 67.7% of the options traded, with the majority activity concentrated at the March expiry $40,000 strike.

A call option gives the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A put option purchaser gets the right to sell.

Put-call skews measure the implied volatility premium drawn by puts relative to calls.

Ether awaits range breakout

Ether has formed a contracting triangle identified by trendlines connecting Feb. 10 and March 2 highs and Jan. 24 and Feb. 24 lows.

A potential breakdown would perhaps imply a continuation of the broader downtrend.