Bitcoin (BTC) is resilient, maintaining elevated price levels below its record highs. This stability suggests a temporary pause typical of a bull market. 

However, recent macroeconomic developments have introduced potential risks hindering upward movement. Chang, a crypto options trader and market analyst, highlighted these concerns in an interview with CoinDesk. He emphasized that fluctuating bond yields and a volatile dollar index might test Bitcoin’s strength.

Rising Treasury Yields and Their Impact

The rising yields on U.S. Treasury bonds have been a focal point for market analysts. The benchmark 10-year Treasury yield has increased by 24 basis points to 4.55% over two weeks, as per TradingView data. Analysts caution that a move above 4.7% could inject volatility into the stock markets. The uptick in yields is attributed to persistent U.S. debt concerns, an influx of bond supply, and increasing Japanese government bond yields.

Elevated yields translate into higher borrowing costs for individuals and companies, diminishing the appeal of riskier investments like Bitcoin and technology stocks. Chang predicts continued yield volatility in June, maintaining a close correlation between Bitcoin and the stock market. The two-year Treasury yield is nearing 5%, prompting macro traders to rotate investments from riskier assets to the perceived safety of government bonds.

Macro Traders Eyeing Bond Yields and Inflation Data

As bond yields reach levels that could weigh on all asset classes, traders are keenly monitoring key economic indicators. Peter Oppenheimer of Goldman Sachs remarked that further increases in bond yields from current levels could have broad repercussions across financial markets. The upcoming release of the personal consumption expenditures (PCE) price index is particularly anticipated for insights into Federal Reserve interest rate policies.

The PCE price index, the Fed’s preferred inflation measure, is scheduled for release on Friday. Forecasts from FactSet anticipate a 2.7% annual rise for April, mirroring March’s increase. The core PCE, excluding food and energy prices, is expected to show a 2.8% yearly rise and a 0.3% month-over-month increase. Should these figures exceed expectations, the case for renewed interest rate cuts might weaken, potentially leading to further hardening of bond yields.

Correlation Between Bitcoin and Broader Markets

The interplay between Bitcoin and broader financial markets is a critical area of focus. With the Fed funds futures indicating investors are pricing in just 35 basis points of rate cuts this year, the reaction of risk assets to economic data becomes even more crucial. Chang notes that a stronger-than-expected core PCE figure would likely discourage investment in risk assets, including Bitcoin.

Bitcoin’s trajectory appears closely tied to macroeconomic trends. While it remains strong, the influence of rising bond yields and shifting investor sentiment towards safer assets could pose challenges.

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