Bitcoin Following the Stock Market “Tick for Tick,” $1.9T Stimulus Bill Passed & Yields Go Up Again
The cryptocurrency market is continuing the upwards momentum on Monday that started over the weekend.
Bitcoin has made its way above $50,000 while Ether trades over $1,700. The greens in the broad cryptocurrency market have a total market cap surpassing $1.55 trillion.
While the price of Bitcoin has slowed down some in the near term after hitting a new all-time high above $58,300 in February followed by a pullback of 26%, the coins continue to be moved off the cryptocurrency exchanges in the expectation of higher future prices.
— William Clemente III (@WClementeIII) March 7, 2021
While the on-chain movement shows bullish momentum, institutional investors on CME closed their positions, but both longs and shorts.
For the week ending March 6, total open interest for CME Bitcoin plummeted to its lowest levels this year as it shed more than 2500 contracts, as per Market Science’s latest report.
Last week, leveraged funds experienced the most dramatic change as these traders closed both long and short positions; their positioning is now as net-short as it has ever been. Interestingly, asset managers are also net short, which wasn't seen through most of the recent bull run.
Non-Reportable traders remain less bullish than their average historically while Other Reportable traders have virtually no short exposure, remaining close to record net-long levels as they own over 25% of all long contracts outstanding. “These conditions have exhibited a bullish statistical edge historically,” noted Market Science.
In the macro-environment, the bullish news came in the form of the $1.9 trillion Covid-19 relief bill which passed the Senate 50-49 on Saturday. Democrats aim to have the bill signed into law early this week.
“As tough as this moment is, there are brighter days ahead — there really are,” President Joe Biden said at the White House after the bill was passed. “It’s never been a good bet to bet against America.”
The bill will send $1,400 payments to millions of Americans, individuals earning up to $75,000 and couples earning up to $150k based on either 2019 or 2020 tax returns. It would also deliver $300 a week in extra unemployment assistance through Sept. 6.
This has the stock market recovering with S&P 500 up 2.9% and Nasdaq 4% after incurring losses ever since hitting new highs in the second week of February.
Bitcoin has actually been following the stock market ever since February, “almost tick for tick,” notes trader and economist Alex Kruger. Hence, the gains and if the traditional market sees red today, it is likely crypto assets will slide too.
Gold, however, is not having a good Monday as the spot prices fell under $1,690 per ounce while the US dollar Index strengthened above 92.2 thanks to yet another bout of a surge in Treasury yields. The 10-year U.S. Treasury yield hit 1.6% on Monday morning, while on the 30-year Treasury bond, it rose to 2.311%. Yields move inversely to prices.
This, however, isn't good for BTC prices as we have seen for the past couple of weeks.
“Rates impact not only BTC but virtually every asset in the world. As one of the (if not the) most liquid asset class, higher rates mean bonds become more attractive than other assets – money flow from everywhere else into bonds,” said Qiao Wange of DeFi Alliance. “At extreme levels this will crush all risk assets.”
Bitcoin has managed to rally because of its adoption narrative in addition to being the best performing asset.