Bitcoin posted its first negative open after rising for three days in a row, climbing to an all-time high above $ 40,000.
The world’s leading cryptocurrency fell as much as 7.45 percent during Monday’s Asian session, hitting an intraday low of $ 36,565 before containing its losses ahead of the European trading hours
The change in sentiment was thanks to speculative traders looking for short-term profits close to $ 40,000.
Meanwhile, given the recent surge in government bond yields, global investors are also betting on reflation trades. The return on the 10-year benchmark Treasury note rose above 1.09 percent for the first time since March.
Inflation expectations typically favor Bitcoin’s bullish outlook (To Buy Bitcoin on eToro Guide), but the market appeared to have allocated its capital elsewhere as the cryptocurrency became too risky to buy near its overbought levels.
For example, US benchmark crude oil prices for West Texas Intermediate rose to over $ 51 a barrel on Wednesday after Saudi Arabia decided to cut production over the next two months. The surge also indicated the economic outlook was stabilizing as investors compared the rising number of coronavirus infections to vaccine distributions.
But does that mean that the demand for safe havens like Bitcoin will decline in the coming period? Obviously not.
Investors may have to jump back into the cryptocurrency market as U.S. President Donald Trump agrees to hand over control to his successor Joe Biden. That coincides with a clear Democratic victory over the two seats in the recent Georgia runoff.
Thanks to that, the Democrats now control Congress. That paves the way for the Biden administration to pass the additional fiscal incentives, starting with a direct $ 2,000 check for Americans grappling with the economic fallout from the coronavirus pandemic.
Many strategists, including those at JPMorgan & Chase, see Bitcoin price close above $ 100,000 amid aggressive government spending.
„I expect Bitcoin and tech stocks to double again in the next 6-9 months,“ explains Immad Akhund, CEO / co-founder of Mercury in San Francisco.
„It is clear that we are in an asset bubble fueled by fiscal stimulus, low interest rates and, ironically, higher disposable income in the pandemic.“
„It probably won’t end well, but enjoy the ride on the way up.“
Can we expect a Bitcoin correction?
Further warnings came from analysts relying on technical indicators. One of them – a pseudonym – sees Bitcoin in a rising wedge channel, which typically signals a bullish-to-bearish switch after a strong pullback. Ultimately, it pushes the price as low as the maximum height between the upper and lower boundaries of the channel.
„We had a fake-out, an M-pattern and a breakdown,“ said the analyst. „I’ll be cautious unless Bitcoin breaks its all-time high again.“