The long-term rally in Bitcoin prices faces significant risk as US Treasury yields rise to their highest levels in months.

Bitcoin (Bitcoin) has enjoyed a strong rally over the past few years, rising from 2022 lows to a record high of $108,000 in December.

The cryptocurrency has benefited from multiple tailwinds, including a rally ETF flows, Which now totals more than $35 billion. Companies like Semler Scientific, MicroStrategy, and Marathon have continued to accumulate more Bitcoin.

At the same time, Bitcoin mining difficulty and hash rate reached record levels. Stock exchange balances fell to their lowest levels in several years, creating favorable supply and demand dynamics.

However, Bitcoin and stocks face significant risk as US Treasury yields rise following the recent decision by the Federal Reserve. The Federal Reserve cut interest rates by 0.25%, bringing the total annual interest rate cuts to one percent. The committee also noted that there will be two additional interest rate cuts this year, which are fewer than expected.

Technical indicators indicate that US bond yields are poised for a recovery. As shown below, the US 30-year yield has formed a near-perfect head and shoulders chart pattern, which is a common bullish reversal signal. If this pattern holds, the next resistance level will be 5.175%, the highest point since October 2023.

I have argued that most asset markets appear overvalued, close to flat. Stocks, corporate bonds, family housing, cryptocurrencies and gold quickly come to mind. But what could be the catalyst for them to sell? What about a meaningful correction in the Treasury market?

– Mark Zandi (@Markzandi) December 8, 2024

Higher bond yields negatively impact stocks and risky assets like Bitcoin due to sector rotation. For example Money market fund Assets rose to $6.83 trillion, up from $5 trillion in 2020, as investors shifted toward safer assets.

Conversely, risky assets like Bitcoin tend to perform well when bond yields decline, as investors diversify their portfolios away from bonds.

I have argued that most asset markets appear overvalued, close to flat. Stocks, corporate bonds, family housing, cryptocurrencies and gold quickly come to mind. But what is the catalyst that might prompt them to sell? What about a meaningful correction in the Treasury market?

– Mark Zandi (@Markzandi) December 8, 2024

Technical analysis of Bitcoin price

I have argued that most asset markets appear overvalued, close to flat. Stocks, corporate bonds, family housing, cryptocurrencies and gold quickly come to mind. But what is the catalyst that might prompt them to sell? What about a meaningful correction in the Treasury market?

– Mark Zandi (@Markzandi) December 8, 2024

However, in the short term, Bitcoin price has several tailwinds that could push it to an all-time high of $108,000. For example, it may benefit from January effect, This is a situation in which investors buy back assets after the Christmas holiday.

Bitcoin may also benefit from FTX's $16 billion dividend and change of guard at the SEC.

On the technical side, Bitcoin appears to have found significant support, as it remains steady above the uptrend line. It also remained above the 50-day moving average, while the MVRV continues to trend upward. Therefore, Bitcoin is likely to rise during the first quarter, although it may stop or decline in the second quarter.