Bitcoin reversed its previous losses after Federal Reserve chief Jerome Powell reiterated the central bank’s tendency to adhere to endless quantitative easing policies on the second day of his testimony to Congress.
The leading cryptocurrency climbed 1.71 percent on Wednesday to close at $ 49,737.82, and fell almost 22 percent in the previous two sessions. It opened higher on Thursday and rose to $ 50,888 in the early Asian session. Other high-capacity tokens also rose, including Ethereum and Binance Coin.
On Wednesday morning sales of US Treasury bonds also pulled the yields on the 10-year note just below 1.43 percent. The result of this sale fell to 1.37 percent, the highest level since February. As of Thursday’s Asian session, the yield is around 1.39 percent.
There are expectations that US president Joe Biden’s $ 1.9 trillion stimulus package will likely hit the Treasury bonds with inflation.
This is because an additional US dollar liquidity to the economy erodes the cash value of interest payments on debt instruments. However, the increase in long-term returns and the increase in real rates point to the optimism of investors about the growth of the US economy.
However, higher returns hurt firms’ equity valuations by changing the price-earnings multiples. Companies with poor earnings according to stock market valuations appear less attractive to investors. Nearly 100 large companies listed on the Nasdaq have values 37 times greater than their earnings.
Bitcoin Against Cash
Tesla and MicroStrategy, two of the leading bitcoin investors in Wall Street, are among those with higher P / E ratios.
Meanwhile, MicroStrategy holds $ 1.5 billion in cryptocurrency. According to a press release released Wednesday, Bitcoin has increased its stocks from about 71,000 BTC to just over $ 90,500.
Listed on the NYSE, Square also reported a higher P / E ratio, meaning the stock remained overvalued based on earnings results. On Wednesday, the mobile payment firm announced that it had purchased $ 900 million worth of bitcoin tokens.
It seems that all of the companies in question expect their cash reserves to lose value in the upcoming sessions due to expanding stimulus packages. Meanwhile, Powell proposes to keep the Fed’s $ 120 billion monthly asset purchase program and interest rates close to zero, so the value of the US dollar against rising returns does not seem attractive to companies.
In turn, given the dollar’s scarcity against unlimited supply injection, it helps to reinforce Bitcoin’s anti-fiat narrative. Meanwhile, among investors who await a rapid recovery of the US economy, risk appetites have been reduced as the Food and Drug Administration approved the Johnson and Johnson vaccine for emergency approval.
Dow Jones ended Wednesday with a record high as risk sensitivity among investors increased. This limited Bitcoin’s growth in the session. Still, analysts point out that the rising bond returns do not affect the cryptocurrency in the long term.