Bitcoin retests $40K after stocks sell-off meets Fed balance sheet bust

Bitcoin (BTC) headed toward $40,000 on April 22 after a major retracement in equities speared bulls’ latest advance.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Bitcoin sheds $3,000 on U.S. stocks plunge

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD being kept firmly under $41,000 Friday after volatility during the latest Wall Street trading session.

Thursday had seen United States markets react sharply to “surging” Treasury yields, the Nasdaq 100 dropping 2% and taking highly-correlated crypto down with it.

US stocks fall in a dramatic reversal as yields surge. Nasdaq 100 drops 2% as US 10y yields jump by 7bps to 2.9%.

— Holger Zschaepitz (@Schuldensuehner) April 21, 2022

With that, Bitcoin briefly lost over $3,000 in a matter of hours, wicking to around $39,800 before recovering.

Another macro trigger meanwhile came in the form of the Federal Reserve’s balance sheet reduction finally getting underway. Also set to pressure stocks and risk assets, the move to combat forty-year record inflation was long priced in but was not visible in the data until now.

“Looks as if Fed balance sheet expansion has stopped shortly before the $9tn mark is reached,” markets commentator Holger Zschaepitz summarized on the day.

“Fed’s total assets have shrunk by $9.6bn to $8,955.9bn. The balance sheet is now equal to 37.3% of the US’s GDP vs ECB’s 83% and BoJ’s 137%.”Fed balance sheet chart. Source: Holger Zschaepitz/ Twitter

As Cointelegraph reported, the European Central Bank (ECB) has yet to show signs of reducing its own balance sheet, itself near $10 trillion.

Comments from Fed Chair Jerome Powell served to add additional angst to sentiment, hinting at further key interest rate hikes for May.

Crypto traders thus remained cautious, with several noting that the week’s run to near $43,000 had not been accompanied by suitable volume, suggesting its validity was suspect from the start.

“Low volume pumps are not to be trusted. They are used for distribution or keeping sellers in control,” popular Twitter trader Roman warned.

“We’ve seen many instances of low volume pumps…..


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