Bitcoin Price Drops, But Derivatives Market Hints at Positive Sentiment Ahead
The gains from the previous three days were erased on October 21, when the price of Bitcoin fell to $67,000. Some analysts claim that investors cutting back on their Bitcoin exposure out of concern about traditional market contagion was one factor in the fall. However, the indicators for Bitcoin derivatives stayed very steady. Bitcoin derivatives were still in high demand as a hedge despite worries that many economies may be slowing down or that people’s faith in the government’s ability to refinance debt is eroding.
On the other hand, on Oct. 21, there was no movement in the Bitcoin futures premium, which often hovers around 5% to 10% in neutral markets. The longer settlement term is reflected in the higher monthly Bitcoin futures pricing, which indicates positive optimism when the premium surpasses 10%.
T. Rowe Price Predicts 10-Year Treasury Yield Surpassing 5% as Government Spending Rises
According to Arif Husain, head of fixed-income at T. Rowe Price, growing inflation expectations and worries about government fiscal spending will push the US 10-year Treasury yield over the 5% mark in the coming six months. When investors sell their bonds, yields rise, suggesting that traders are looking for more profits.
Husain pointed out that the Federal Reserve is working to reduce its balance sheet in an effort to control inflation and keep the economy from overheating, while the government would “flood” the market with new debt issues. Since the interest expenses on US debt have risen to above $1 trillion a year, the central bank is considering reducing interest rates.
Bitcoin Correlation with S&P 500 Surges Amid Macroeconomic Uncertainty
Fear, uncertainty, and doubt (FUD) have had a big impact on Bitcoin’s price movements in the face of macroeconomic uncertainty. The 40-day correlation has stayed above 80% for the past month, suggesting that both asset classes have aligned, despite the fact that Bitcoin is sometimes seen as being uncorrelated with traditional markets due to its periods of total detachment from the S&P 500.
Recent data indicates that similar forces are driving both markets, in contrast to the time between mid-July and mid-September when there was either a negative or negligible correlation between Bitcoin and the S&P 500. The growing link between Bitcoin and gold, which crossed 80% on October 3, lends more credence to this theory.
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