Key Bitcoin Takeaways
- Bitcoin prices edged lower during the weekend session amid choppy sentiment.
- The cryptocurrency remained resilient to aggressive bullish moves against a firmer US dollar and Treasury yields.
- Nevertheless, it holds above crucial technical support, eyeing a breakout above $60,000.
Bitcoin underwent a minor sell-off during the weekend session but held above a historically crucial technical support, keeping hopes of posting extended bullish moves alive as it headed into a new weekly session.
The flagship cryptocurrency opened in positive territory on Monday, rising by a modest 0.48 percent ahead of the London opening bell. Its upside move appeared as the price repeatedly bounced off its 20-day exponential moving average. The wave held Bitcoin’s upside bias throughout the weekend and served as support at this week’s beginning.
The SLR Effect
Bitcoin shrugged off a significant week prior as the Federal Reserve, Bank of England, and Bank of Japan declared their interest rate decisions and monetary policy guidance. The 10-year US Treasury yield stayed on its upward trajectory as the Fed signaled zero-intervention.
Bitcoin likely stayed cautious due to the Fed’s decision to let the capital rule expire on March 31. The so-called Supplement Leverage Ratio (SLR) is a capital policy that requires US banks to hold a minimum of 5 percent capital of their net assets. Last April, the Fed had excused Treasuries and reserves from banks. It enabled them to purchase Treasuries.
Therefore, with the central bank allowing the capital rule to expire, the market expects that the banks’ demand for government bonds would fall because they would need to hold up more capital against their Treasury reserves. In turn, that would shoot up yields further higher.
Bitcoin bulls see higher yields as a bearish signal. The cryptocurrency did extremely well amid a negative-to-low yielding environment last year, rising alongside risk assets. But it now trades as an overvalued asset, risking declines as higher yields increase the appeal of the US dollar among foreign investors as an alternative safe-haven.
U.S. Treasury yield has been surging very fast.
This takes a toll on all risk-on markets.
Yet Bitcoin is still above $55k.
This is what $BTC bull run looks like. Resilient.
— Joseph Young (@iamjosephyoung) March 22, 2021
Nevertheless, Bitcoin is resilient as it holds above the 20-DMA support. That could be due to three speeches scheduled for the Fed chairman Jerome Powell this week. The market expects the governor to calm uncertainties surrounding the rising Treasury yields.
Bitcoin Levels to Watch
Technically, Bitcoin now consolidates inside a symmetrical triangle pattern, giving no forward guidance on its next bias.
The cryptocurrency’s explosive adoption rate among institutions provides a backstop to its ongoing bullish move. Meanwhile, higher yields offset those upside calls. That explains why BTC/USD trades sideways with low volumes. All it needs is a breakout move for now.
For now, it appears Bitcoin would fluctuate within the Triangle range. If the cryptocurrency continues to stay above 20-DMA on the daily chart, its potential to break bullish is higher. That would mean an easy retest of $60,000 as interim resistance, followed by an extended move to a new record high.
Conversely, a break below 20-DMA would prompt a bearish breakout move on the four-hour chart. The Bitcoin price risks falling to $55,000 or below should that happen.
