The price of Bit coin (Bit coin) hit a new all-time high of over $99,000 last Friday, but has since seen a significant correction, falling below $91,000 this morning. Geoff Kendrick, head of global digital asset research at Standard Chartered, pointed out that multiple factors, including changes in the US Treasury market and the upcoming monthly options expiration, have driven this correction.
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ToggleChanges in the US Treasury market affect the attractiveness of Bit coin
Geoff Kendrick attributed the recent market volatility, including the drop in Bit coin prices and the rise in US long-term Treasury yields, to the decline in the US Treasury term premium. The term premium is the additional yield that investors demand for holding long-term bonds rather than short-term bonds.
The analyst pointed out that Bit coin is often seen as a hedge against instability in traditional financial markets (TradFi), and the improvement in confidence in US Treasuries may temporarily weaken the appeal of Bit coin, further leading to a drop in its price. Geoff Kendrick wrote in a report on Tuesday:
"This is important for Bit coin, as one of its core uses is to hedge issues related to traditional finance, such as banking or Treasury-related risks. Therefore, the decline in term premium is unfavorable for Bit coin in the short term."
However, he remains optimistic about Bit coin's long-term prospects. He reiterated his forecast of Bit coin reaching $125,000 by the end of the year, and expects the price to further rise to $200,000 by the end of 2025.
Options expiration exacerbates short-term pressure on Bit coin
In addition, the expiration of Bit coin monthly options is another factor putting pressure on its short-term price. Data on options expiring this Friday shows that, according to Deribit's data, there are currently 18,000 open contracts with strike prices ranging from $85,000 to $100,000. Kendrick said, "This usually means the price will be stuck before the options expire."
However, despite the correction, Bit coin is still supported by strong institutional investor demand. Kendrick noted that since the US election earlier this month, Bit coin ETFs have accumulated about 77,000 Bit coins, while MicroStrategy has purchased an additional 134,000 Bit coins.
"MicroStrategy's buying behavior shows no signs of slowing, and they are also unlikely to sell. However, since the election, the average purchase price for ETFs and MicroStrategy has been $88,700, which may provide short-term support, and Bit coin prices may consolidate in the $85,000 to $88,700 range before resuming an upward trend."
