Bitcoin Sell-Off Resumes Ahead of Key Economic Data; What to Expect?

Bitcoin prices plunged alongside the tech stock futures ahead of the fresh data on the economic growth, manufacturing sector, and jobless claims, which will offer fresh insights on whether investors would need to stay exposed to the flagship cryptocurrency in the foreseeable future.

Spot BTC/USD rates fell modestly by 0.17 percent to $49,653 during the European session Thursday. The plunge appeared amid a choppy trading session that saw the pair wobbling between$48,078 and $50,888 during the Asian trading hours. Intraday-wise, the price movements showed the Bitcoin market in a bias-conflict.

The US stock market looked no different. On the one hand, futures tied to the blue-chip Dow Jones Industrial Average climbed 0.2 percent. Meanwhile, on the other, the benchmark S&P 500 index was flat, and the tech-savvy Nasdaq Composite slipped 0.4 percent, suggesting declines in the pandemic winners after the New York opening bell.

Bitcoin was also among the best-performing assets during the coronavirus pandemic last year, its 1,200 percent-plus gains led by the US government and—its central bank—the Federal Reserve’s expansionary fiscal and stimulus policies of overcrowding markets with trillions of US dollars.

So it appears, investors shifted out of the parabolic assets to raise their bids in the instruments that looked cheaper—a rotational trade. That includes stocks in the Asian markets—emerging economies—that closed the Wednesday session higher. European indexes were also looking healthier on economic reopening hopes.

Bitcoin Wobbling

More so, the bitcoin prices wobbled around $50,000 as investors measured its short-term sentiment against the rising US government yields.

In retrospect, investors sold off their Treasury holdings to seek exposure in growth-based assets. That led the yield on the 10-year Treasury note up to 1.413 percent from 1.388 percent on Wednesday. That signaled a sentimental shift away from the safest assets, which limited Bitcoin’s upside attempts in the previous 24 hours.

Offsetting the concerns were inflation warnings. Investors closely watched the Federal Reserve Chairman Jerome Powell’s testimony to the US Congress on Tuesday and Wednesday as their cue to anticipate higher inflation rates in the future.

In line with his previous statements, Mr. Powell said that the central bank would continue purchasing government bonds and corporate securities at the rate of $120 billion a month until the economy recovers maximum employment and an inflation rate above 2 percent.

Economic Data

An early estimate for the US gross domestic product in the fourth quarter will be out at 0830 am ET, along with the latest data on weekly jobless claims. While economists expect moderate declines in unemployment for the week ending February 20, the number of total applicants could remain at higher levels.

That would lead to a broader fiscal response from the US government. President Joe Biden’s administration will introduce its $1.9 trillion stimulus package to the House on Friday. Its successful escalation to the Senate could stress the US dollar lower. Meanwhile, bitcoin could rise further owing to its anti-fiat narrative.

Meanwhile, economists agree that Fed would intervene if the long-dated yields rise any further.

“Fed will intervene to bring rates down,” stressed Alex Krüger. “That is my thesis and that of many others. If that trend is not stopped hold on to your horses because risk assets, gold, and highly likely bitcoin as well are all in for a very rough ride down. You want to watch interest rates like a hawk.”