Bitcoin has the potential to hit $56,000 in the coming sessions, asserted independent market analyst Josh Rager.
The Blockroot.com founder said in a tweet published Tuesday that BTC/USD could keep on rallying higher based on two reasons. First, the recent approval of US President Joe Biden’s $1.9 trillion stimulus package in the Senate could assist the ongoing Bitcoin recovery rally in growing further. And second, the cryptocurrency’s positive correlation with the US stock market could act as a bullish tailwind.
“Some are saying this is the beginning of a larger correction,” said Mr. Rager. “Sure, [it] could be. But I want to see the price at least come up to retest $56,000 first. But with a $1.9T stimulus in the works and stocks opening up higher, it’s hard for me bearish on Bitcoin at the moment.”
A Bullish Recipe
The statements took cues from Bitcoin’s performance last year. Since March 2020, Bitcoin and all the indexes on Wall Street rallied almost in sync with one another as the Federal Reserve started its unlimited bond-buying program and slashed its benchmark lending rates to near-zero. Meanwhile, the US government introduced two stimulus bills worth a combined total of $3.1 trillion.
Traders and investors flocked to Bitcoin and similar riskier assets because of the lack of attractive US Treasurys returns. Meanwhile, massive capital injection reduced the US dollar’s purchasing power, with the US dollar index dropping by more than 12 percent, hurting savers and institutions with cash-based balance sheets.
Entering March 2021, the catalysts have not changed much. The Fed is buying $120 billion worth of government debt and mortgage-backed corporate securities every month. Its interest rates are still hovering near zero. Meanwhile, the $1.9 trillion aid’s approval expects to pressure the US dollar lower in the long-term.
Bitcoin surged above $54,000 on Tuesday for the first time in two weeks. The cryptocurrency’s upside move came in sync with the US stock market’s recovery rally. Investors pounced back on beaten-down tech stocks on buy-the-dip mentality, sending the Nasdaq Composite Index flying by 3.2 percent.
Meanwhile, the US benchmark S&P 500 rose 1.8 percent while the blue-chip Dow Jones flirted with record levels after adding 250 points to its index.
…the recovery move comes with market risks. Of late, the pandemic winners, including bitcoin, faced severe downside pressure from the sell-off in government bonds. Investors flocked out the Treasury markets after anticipating a faster-than-expected economic recovery in the US. They moved capital into assets that lost their value the most during the pandemic.
Fears persisted that rising US bond yields would force the Fed to hike its interest rates. While the central bank chairman Jerome Powell clarified in a speech last week that it won’t pursue any hawkish policy, Bitcoin and the stock market traded higher cautiously.
“The fact that Bitcoin seems to keep up with the rise of interest rates is definitely a good sign,” said Nick, the author of the Ecoinometrics newsletter. “This means that adoption remains the main driver of this cycle.
“If you believe that to reach its natural market size (physical gold), Bitcoin has 10x more to grow; then you aren’t worried about the temporary rising yield situation,” he added.