The Bitcoin price has gone sharply into reverse, sliding nearly 9% over the past 24 hours and 13% from Tuesday's record high. Wednesday's Federal Reserve meeting appears to be the trigger for Bitcoin's reversal, coming as the 10-year Treasury yield spiked and the Nasdaq 100 dived 3.6%.
While the 10-year Treasury yield has pulled back a bit after hitting a nearly seven-month high on Thursday, S&P 500 and Nasdaq 100 futures are pointing sharply lower in early Friday stock market action. Bitcoin plays pared early losses on Friday, including MicroStrategy (MSTR), Coinbase (COIN), Robinhood Markets (HOOD) and MARA Holdings (MARA).
↑ XMarket analysts have noted Bitcoin's reverse correlation to long-term Treasury yields and its positive correlation with high-beta growth stocks.
Bitcoin is often compared to a digital type of gold, and the price of gold tends to fall when real interest rates rise. The 10-year TIPS yield has spiked to 2.25% from 2.06% a week ago and 1.9% two weeks ago. Higher real yields raise the opportunity cost of holding gold.
Some profit-taking in Bitcoin is to be expected after the cryptocurrency's value surged around 55% following Trump's election along with a Republican Congress.
CoinDesk reported that some long-term Bitcoin holders have sold amid the recent run-up in price.
Bitcoin rallied after Trump's win partly on expectation of a much more crypto-friendly regulatory environment, but also on a belief that the President-elect will follow through on his campaign talk of establishing a strategic Bitcoin reserve with government money.
Trump reiterated his intention last week, helping to fuel the latest run-up in the Bitcoin price. Some Bitcoin insiders also offered some details about how Trump might establish a strategic Bitcoin reserve, even if Congress doesn't go along, by utilizing the Treasury Department's Emergency Stabilization Fund.
Trump's — and Elon Musk's — ability to bend Congress to his will is in focus this week, as Congress tries to avoid a government shutdown.
Fed Chair Jerome Powell, in his press conference on Wednesday, added to that pressure — making clear that Fed can not add bitcoin to its balance sheet.
"The Federal Reserve Act says what we can own," Powell said. Changing the rules to allow bitcoin was "the kind of thing for Congress to consider, but we are not looking for a change at the Fed" he said.
The Bitcoin price dipped as low as $92,707 early Friday, down about 6% over the prior 24 hours. The cryptocurrency traded as high as $108,262 on Tuesday morning.
MicroStrategy, which is already down 20% this week after news of its addition to the Nasdaq 100, narrowed its premarket loss to 0.6% on Friday. Robinhood was off 3%, COIN 1.6% and MARA 1.2%.
S&P 500 futures are down 0.5% and Nasdaq 100 futures 0.9%.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
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