Why Bitcoin Might Suffer In The Coming Weeks?

Bitcoin recorded an 11% increase last week, reaching highs comparable to those of July. However, according to some analysts, macroeconomic headwinds might soon disrupt this bullish momentum.

The yield on U.S. bonds, a threat to Bitcoin

Yuya Hasegawa, an analyst at Bitbank in Japan, sounded the alarm about the evolution of the U.S. bond market. According to him, the rise in Treasury yields is “a concern for Bitcoin in the near future.”

Indeed, when bond yields remain high, they tend to become more attractive than assets considered risky, such as Bitcoin. This phenomenon can lead investors to abandon cryptocurrencies in favor of U.S. bonds, perceived as safer.

In mid-October, the yield on the 10-year Treasury note oscillated between 4.02% and 4.08%, a level high enough to represent an attractive alternative to crypto-assets.

Moreover, recent U.S. economic data stronger than expected have rekindled concerns about the Federal Reserve’s (Fed) monetary policy. Retail sales above expectations and the decrease in jobless claims cast doubt on how quickly the Fed might ease its rate policy.

A rate cut in November remains possible

Despite these concerning factors, Hasegawa believes there is still a “reasonable chance” that the Federal Open Market Committee (FOMC) will opt for a 25 basis point cut at its early November meeting. This opinion seems to be shared by the majority of traders, as only 9% of them anticipate a status quo on U.S. interest rates.

The recent decision by the European Central Bank (ECB) to lower its key rates by 25 basis points could also support the Bitcoin rate in the short term. Valentin Fournier, an analyst at BRN, explains that “this rate cut should increase market liquidity, thereby boosting the performance of risk assets such as Bitcoin.”

The combination of significant inflows to Bitcoin ETFs and favorable macroeconomic catalysts suggests the possibility of a strong price surge. Fournier even envisions a scenario where Bitcoin could reach $70,000 by Monday, provided it avoids a weekend rejection.

In conclusion, although macroeconomic challenges persist, particularly regarding bond yields and Fed policy, Bitcoin seems to benefit from a generally favorable context in the short term. However, investors will need to remain vigilant in the face of potential turbulence that may arise in the coming weeks.