Fed’s Brainard Speech Counters Bitcoin Crash Fears With Rising Yields



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Bitcoin remained in its key technical support area despite a worrying selloff on Tuesday, raising hopes that it can survive the bearish assault that slashed its prices by 21.32 percent last week.

The benchmark cryptocurrency reported early gains on Wednesday, rising as much as 2.72 percent to $ 49,470 after bouncing off its 20-day exponential moving average support. Its bullish move accompanied small volumes, alerting the bulls to wait for a confirmation before extending its bullish bias.

Bitcoin stands firm

Tuesday was all about profit taking. Bitcoin’s wild bullish move of 9.74 percent at the beginning of this weekly session led traders to minimize their risks. Concerns that the Federal Reserve would raise its benchmark interest rates in the wake of rising Treasury yields led investors to the safety of cash. US stocks also reacted negatively to investor anxiety.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin maintains its weekly bullish setup as yields calmly climb. Source: BTCUSD on TradingView.com

The yield on 10-year US Treasuries rose to 1.6 percent last week, its best level in a year, raising questions among investors about higher inflation and borrowing costs. Meanwhile, real U.S. yields, which are adjusted for inflation expectations, also rose as investors expect President Joe Biden’s $ 1.9 trillion coronavirus stimulus package to fuel strong growth. of US prices.

Bitcoin doesn’t provide heaps of interest payments. Hence, it tends to underperform in the face of rising returns, just like gold does. Nonetheless, with the rally in yields showing signs of calm, the cryptocurrency is regaining its bullish bias.

Fed intervention

Bitcoin’s price surge on Wednesday was also inspired by Lael Brainard, one of the Washington-based Federal Reserve governors, who offered the first major clue about possible central bank intervention in the bond market sell-off. in progress.

Ms Brainard warned market participants that the Fed is far from where it can begin to reduce its expansionary policies, further noting that she would be concerned if it sees any “disorderly or persistent tightening and financial conditions” that could hamper policy. of the Fed. Goals.

“The economy remains far from our targets in terms of employment and inflation, and it will take some time to make further substantial progress,” Ms Brainard clarified. “We will have to be patient to achieve the results stated in our guide.”

He noted that the Fed would continue with its bond buying program amid a near-zero rate environment. What’s more, any rate hike, if it comes, would be gradual to ensure minimal volatility in bonds and the stock market.

The 10-year US Treasury yield fell to 1,393 overnight Tuesday after Brainard’s comments. US equity futures were up, indicating an optimistic start when the market opens on Wednesday.

“They are likely to respond via cash purchases to the 10, 20 or 30-year bond, as those rates may hit corporations the most,” said Ben Lilly, author of the crypto-focused newsletter ChainPulse. “And in the medium and long term, this is great for bitcoin … at the expense of some short-term problems.”

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