Bitcoin has posted its first negative opening after rising for three straight days 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 stemming its losses ahead of European trading hours. The shift in sentiment was thanks to speculative traders looking to lock in short-term gains near $40,000.
Bitcoin is feeling higher buying sentiment in the $36,000-36,500 range.
Meanwhile, global investors also bet on reflation trades amid the recent rise in government bond yields. The yield on the benchmark 10-year Treasury note rose above 1.09 percent for the first time since March.
Inflation expectations typically favor Bitcoin’s bullish outlook (Go to Buy Bitcoin at eToro guide), but the market seemed to have allocated its capital elsewhere as the cryptocurrency became too risky to buy near its overbought levels.
For example, U.S. benchmark West Texas Intermediate crude oil prices rose above $51 a barrel on Wednesday following Saudi Arabia’s decision to cut production over the next two months. The rise also pointed to a stabilizing economic outlook as investors compared the rising number of coronavirus infections to vaccine distributions.
But does that mean demand for safe havens like bitcoin will fall in the coming period? Apparently not.
Investors may have to jump back into the cryptocurrency market as U.S. President Donald Trump agrees to hand control to his successor, Joe Biden. This coincides with a clear victory for Democrats over the two seats in the recent runoff elections in Georgia.
Thanks to that, Democrats now control Congress. That paves the way for the Biden administration to pass the additional fiscal stimulus, starting with a direct $2,000 check for Americans struggling with the economic consequences of the coronavirus pandemic.
Many strategists, including those at JPMorgan & Chase, see the bitcoin price closing above $100,000 amid aggressive government spending.
„I expect bitcoin and tech stocks to double again in the next 6-9 months,“ says Immad Akhund, CEO/co-founder of Mercury in San Francisco, for example.
„It’s clear we’re 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.“
Are we in for a bitcoin correction?
Other warnings came from analysts who rely on technical indicators. One of them – a pseudonym – sees Bitcoin in a rising wedge channel, which typically signals a bullish-to-bearish shift after a strong pullback. Eventually, it pushes the price as low as the maximum height between the upper and lower boundaries of the channel.
Bitcoin’s Rising Wedge indicator sees the price back below $30 in the futures, opines MMCrypto.
„We’ve had a fake-out, an M-pattern and a breakdown,“ the analyst said. „I’m going to be cautious unless Bitcoin breaks the all-time high again.“
BTC/USD was trading at $38,494 at the time of publication.