Bitcoin reverses slightly higher after initial move lower on rate spike
The price of bitcoin saw a modest bounce on Thursday as investors shook off a hotter-than-expected inflation report that led to a jump in the 10-year U.S. Treasury yield.
Bitcoin rose 1.5% to $45,150.37, according to Coin Metrics. Earlier in the morning it fell about 2% alongside equities as new key inflation data showed the largest reading since 1982 and sent the 10-year yield higher.
At its high, the benchmark yield hit 2.001% on Thursday.
“Bitcoin prices are holding up nicely given the surge in global bond yields,” said Edward Moya, senior market analyst at Oanda. “Bitcoin’s best environment going forward is risk appetite and that might prove to be difficult until we get past the first couple of rate hikes by the Fed.”
Tech stocks tend to fall as yields rise, as growth-oriented companies are more likely to give investors higher returns in the distant future rather than the near term.
“Bitcoin’s institutional investors are focused on Treasuries as that momentum trade appears to be rather straightforward,” Moya said, adding that the cryptocurrency “seems poised to consolidate between the $40,000 and $50,000 level over the short-term.”
Bitcoin has been trading like equities, and specifically like tech stocks, for several months as more institutional investors take an interest in the crypto, with some even trading bitcoin as a risk asset. As a result, the cryptocurrency has been selling off in tandem with tech stocks, which declined sharply to start the year, despite a rebound in February.
However, its long-term thesis as a store of value or “digital gold” is still alive and well with investors, despite the wave of new institutional interest, which may help explain why the cryptocurrency’s bounce has held while stocks turned lower.