First Mover: Bitcoin Hovers Below $50K as Traders Await Fed's Take on Bond Yields
 March 4, 2021  Everything you need to make sense of the crypto markets and beyond Sponsored By:  By the CoinDesk Markets Team Edited by Lawrence Lewitinn If you were forwarded this newsletter and would like to receive it, sign up here. Bitcoin (BTC) -5.2% $49,326 Ether (ETH) -4.5% $1,562 (Price data as of Mar. 4 @12:40 UTC) Good morning. Here's what we're writing about:
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MARKET MOVES by OMKAR GODBOLE Bitcoin Hovers Below $50K as Traders Await Fed's Take on Bond Yields Bitcoin's recovery appears to have stalled as caution sets in ahead of expected comments from Federal Reserve Chairman Jerome Powell later on Thursday.
The cryptocurrency is currently nursing losses below $50,000, having bounced from $43,000 to $52,500 in the past four trading days, according to CoinDesk 20 data.
A Q&A between Powell and the Wall Street Journal today will be closely watched by investors as it may influence risk sentiment in the financial markets and set the tone for the next big move in bitcoin. Specifically, what Powell says about bond yields will be of interest, trader and analyst Alex Kruger told CoinDesk.
According to ING analysts, "comments that [Powell] is monitoring events in the Treasury market might be enough to calm things down, encourage a return to a softer dollar."
That could bode well for bitcoin and stocks. Both assets have mostly moved in the opposite direction to the dollar index over the past 12 months, as seen below.
 Bitcoin and S&P 500 inverse correlation with the dollar (Source: TradingView)
However, the rally in yields may accelerate, leading to a stronger dollar and weaker bitcoin, if Powell downplays concerns over rising bond yields, taking cues from his European Central Bank counterparts.
"No such concern [from Powell] would suggest the Fed is happy for Treasury yields to 'find the right level' – as our bond strategy colleagues say – potentially triggering another spike in yields and more dollar short-covering," ING analysts noted.
At press time, bitcoin is changing hands near $49,010 – down 5% over 24 hours. The 10-year U.S. yield is seen at 1.46%, and the dollar index is hovering above 91, representing a 0.2% gain on the day.
The 10-year yield surged to 12-month highs above 1.6% last week, as traders priced in prospects of an early unwinding of stimulus by the Fed. As such, both stocks and bitcoin faced selling pressure, with the latter falling 20%, the biggest single-week decline in nearly 12 months. Both asset types have benefitted from the Fed's massive stimulus delivered since the March 2020 crash.
According to Citi analysts, markets are now pricing in an 80% chance of a 25-basis-point Fed rate hike to 0.25% by December 2022. Until a few weeks ago, the first interest rate hike was expected to happen in 2024.
Dollar rallies
The Dollar Index has already broken out of a falling wedge pattern on the weekly chart, indicating the end of a year-long bearish trend and a reversal higher.
 Dollar index weekly chart (Source: TradingView)
A rising dollar is one of the bigger headwinds for bitcoin's bullish trend, Kruger said.
If the bullish pattern on the DXY is a guide, the market looks to be pricing in low odds of Powell talking down yields and triggering another risk-on rally in stocks and bitcoin.
--Omkar Godbole
Read the original story here:
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OMKAR GODBOLE Goldman Says Market Overpricing Odds of Fed Rate Hike, a Relief for Bitcoin Bulls Wall Street firm Goldman Sachs said Thursday that traders might be prematurely betting that the Federal Reserve will move quickly to unwind the past year's unprecedented monetary stimulus.
The investment banking giant's comments could offer relief to bitcoin bulls, some of whom argue that trillions of dollars of money printing by central banks raises the chances of inflation, bolstering the cryptocurrency's use as an investment hedge.
"The earliest the Fed will start talking about tapering [of bond purchases] is late 2021, with any discussion of interest rate hikes only coming a year after that," Goldman Sachs' Andrew Tilton told CNBC.
The market for futures contracts used to bet on Federal Reserve funds now implies that the first interest-rate hike could come as soon as 2022, versus the 2024 lift-off implied about four weeks ago. What's more, the futures are now pricing multiple rate hikes in 2023.
"That feels aggressive to us," Tilton said, adding that the Fed hasn't even begun tapering its ongoing $120 billion-a-month of bond purchases, a supplemental form of monetary easing once interest rates are cut close to zero, as they were early last year when the pandemic hit.
The Fed said earlier this year that it's committed to continue buying $120 billion worth of bonds per month until it sees "substantial further progress" in the recovery. The bank has also reiterated that interest rates would remain at record lows for some time after inflation rises above its 2% target.
A tapering or rate hike could dilute bitcoin's appeal as an inflation hedge, inviting some selling pressure from momentum funds who bought the cryptocurrency as a store-of-value asset.
The cryptocurrency fell by 20% last week, the biggest single-week decline since March 2020, as U.S. Treasury bond yields rose, indicating that markets were pricing in prospects of an early Fed tightening. --Omkar Godbole Read the original story here: Goldman Says Market Overpricing Odds of Fed Rate Hike, a Relief for Bitcoin Bulls
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The CoinDesk 20 filters from the larger universe of thousands of cryptocurrencies and digital assets to define a core group of 20. These assets constitute roughly 99% of the market by volume at eight of the largest and most trustworthy exchanges.
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ICYMI In case you missed it, here is yesterday's episode of First Mover: Bitcoin Retakes Key $50K Level; Michael Saylor on His Bitcoin Strategy MicroStrategy CEO Michael Saylor joins "First Mover" to discuss his company's aggressive bitcoin purchases and why he has spent over $2.1B to buy almost 91,000 BTC. Also, Charlie Lee talks about the future of his litecoin cryptocurrency and blockchain comes to the automotive industry. MOBI CEO Chris Ballinger on his project and partnerships with BMW, GM and Ford.
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