Red alert for Bitcoin price as 30-year Treasury yield forms risky pattern

The long-running Bitcoin price bull run is facing major risk as US Treasury yields climb to their highest levels in months.

Bitcoin (BTC) has had a strong rise over the past few years, rising from its 2022 low to a record high of $108,000 in December.

The cryptocurrency has benefited from multiple tailwinds, including increased ETF inflows that now total more than $35 billion. Companies like Semler Scientific, MicroStrategy, and Marathon continued to accumulate more Bitcoin.

At the same time, Bitcoin’s mining difficulty and hash rate also reached record levels. Balances in the stock markets fell to their lowest levels in recent years, creating positive supply and demand dynamics.

However, with US Treasury bond yields increasing following the Federal Reserve’s latest decision, Bitcoin and stocks face a major risk. The Fed reduced interest rates by 0.25%, bringing the total of annual interest rate cuts to one percent. The committee also stated that there will be two more interest rate cuts this year, smaller than expected.

Technical indicators suggest US yields are poised to rebound. As shown below, the US 30-year yield has formed a nearly perfect inverse head and shoulders chart pattern, which is a popular bullish signal. If this pattern continues, the next resistance level will be 5.175%, the highest point since October 2023.

I have argued that most asset markets appear overvalued and on the verge of frothing. Stocks, corporate bonds, single family homes, crypto and gold immediately come to mind. So what could be the catalyst that would accelerate their sales? How about a meaningful correction in the Treasury bond market?

— Mark Zandi (@Markzandi) December 8, 2024

Higher bond yields negatively impact stocks and risky assets like Bitcoin due to sector rotation. For example, money market fund assets rose to $6.83 trillion from $5 trillion in 2020 as investors turned to safer assets.

Conversely, risky assets like Bitcoin tend to do well when bond yields fall as investors shift their portfolios away from bonds.

I have argued that most asset markets appear overvalued and on the verge of frothing. Stocks, corporate bonds, single family homes, crypto and gold immediately come to mind. So what could be the catalyst that would accelerate their sales? How about a meaningful correction in the Treasury bond market?

— Mark Zandi (@Markzandi) December 8, 2024

Bitcoin price technical analysis

I have argued that most asset markets appear overvalued and on the verge of frothing. Stocks, corporate bonds, single family homes, crypto and gold immediately come to mind. So what could be the catalyst that would accelerate their sales? How about a meaningful correction in the Treasury bond market?

— Mark Zandi (@Markzandi) December 8, 2024

But in the short term, Bitcoin price has multiple tailwinds that could push it to its all-time high of $108,000. For example, it can benefit from the January Effect, where investors buy back assets after the Christmas holidays.

Bitcoin could also benefit ahead of the $16 billion FTX deployments and the changing of the guard at the Securities and Exchange Commission.

From a technical standpoint, Bitcoin appears to have found significant support by consistently holding above the ascending trend line. Additionally, the MVRV indicator continues its upward trend while remaining above the 50-day moving average. Therefore, Bitcoin is likely to rise in the first quarter, but may stall or pull back in the second quarter.