Bitcoin Eyes $60,000-Breakout Ahead of Biden Spending Announcement
Bitcoin held gains, bond yields rose, and gold slipped ahead of President Biden’s next big spending push that could total anywhere between $2 trillion and $4 trillion.
The BTC/USD exchange rate approached $60,000 in an early morning rally in Asia, driven higher by a flurry of fundamentals, ranging from PayPal’s decision to add a crypto checkout service to Visa settling transactions in stablecoin USDC. Traders flocked into Bitcoin, believing that the cryptocurrency’s robust mainstream adoption would prove bullish.
Bitcoin’s top rival Gold suffered. The spot XAU/USD exchange rate slipped below $1,700 on Wednesday, reacting to an intraday climb in the US government bond yields in the previous session that left the US dollar stronger. Gold tends to move inversely to the greenback.
The interest rate on the benchmark 10-year US Treasury note climbed to as high as 1.773 percent — its highest level since January 2020 — before retreating lower to 1.724 percent at Tuesday’s close. Its rise raised the US dollar’s appeal in international markets, prompting the US dollar index to reclaim its early November 2020 top at 93.43.
Bitcoin Above $60,000
Bitcoin in late February reacted negatively to rising bond yields. Nevertheless, the cryptocurrency came on its own amid repeated news of its mainstream adoption, led by Tesla’s $1.5 billion investment and followed by its decision to sell its electric vehicles for the cryptocurrency. Meanwhile, Morgan Stanley also included three bitcoin funds into its investment service portfolio.
Loose monetary policies provided tailwinds to Bitcoin’s bullish bias all across 2020. The cryptocurrency closed the year 302 percent higher as the Federal Reserve maintained its near-zero interest rates and bought government debts and mortgage-backed securities at the pace of $120 billion per month.
Bitcoin also surged as the US government borrowed more than $5 trillion for its three coronavirus stimulus packages, raising worries about potential monetary debasement and higher-than-expected inflation.
The bullish sentiment prevailed in 2021, with institutional adoption taking the front seat. Bitcoin rose by another 100 percent as it refreshed its record high above $61,000.
Biden’s Spending Spree
More gains would likely appear this week as President Joe Biden announces a new government spending plan on Wednesday, almost less than a month after passing a $1.9 trillion stimulus bill. Traders perceive stimulus packages as bullish for bitcoin as investors and corporates attempt to offset inflation fears by increasing their safe-haven bids.
Larry Milstein, head of government and agency trading at R.W. Pressprich & Co, says that additional stimulus would fuel the US economic recovery. In turn, the 10-year note yields would rise to 2.25 percent by the end of this year that would catch the Fed officials’ eyes that have vowed to keep their inflation target above 2 percent.
“If we start to see a significant move higher in rates, then we may see a reaction from the Fed,” he said.