Bitcoin recovers from below 80K as Treasury yields stabilise

Bitcoin is rising on Friday, recovering some of this week's losses as a drop in Treasury yields and oil prices supports risk assets. However, Bitcoin is still on track to fall over the week.

Bitcoin trades 1.5% higher at the time of writing at $82K, having recovered from a low of $79.7K yesterday. The broader cryptocurrency market is up 2% over the past 24 hours at $2.76 trillion.

BTC upside limited by lingering inflation concerns and ETF outflows

Bitcoin is advancing cautiously amid an improved market mood as U.S. Treasury yields extend their declines, pulling the USD back from an 18-month high.

Despite hotter-than-expected CPI and PPI inflation data this week, which initially saw markets ramp up rate hike expectations,  Fed speakers, including Federal Reserve Chair Kevin Warsh, have steered the market away from a rate hike this month.  

Speaking overnight at the International Monetary Fund Meeting in Bangkok. Fed chair Warsh signalled that hotter-than-anticipated inflation data this week had not swayed his view on the U.S. economy, prompting markets to further scale back bets on a rate hike this month.

According to the CME FedWatch tool, the market sees just a 15% chance of a rate hike on October 28, down from expectations of 55% earlier in the week following stronger-than-expected U.S. inflation figures. This easing in rate expectations has helped lift demand for BTC, which tends to perform better in a lower interest rate environment. However, the market still prices in around a 90% probability of a rate hike before the end of the year, which could keep the lid on any gains. 

  Treasury yields have also moved lower as a sell-off in technology stocks this week has fuelled safe-haven demand for government bonds. The 10-year Treasury yield has fallen below 5.1%, easing from the 5.334% multi-decade high seen earlier this month.  Lower yields can support risk assets such as Bitcoin and equities by easing financial conditions. U.S. equity futures are also pointing higher, helping to improve sentiment across markets.

Next week could be quieter during the Fed blackout period ahead of the October 27–28 FOMC meeting. U.S. PMI data will provide a further read on the strength of the economy but is unlikely to change the outlook for rate hikes significantly.

BTC ETF demand remains erratic in October

Also limiting the upside has been fluctuating institutional demand for Bitcoin  this month.

Bitcoin ETFs are on track to record a second straight week of net outflows and have recorded $534.7 million in outflows so far in October. However, net inflows of $175.6 million were recorded on Tuesday, marking the strongest daily inflows so far this month. BTC ETF demand has been erratic after three straight months of net inflows. While Tuesday's inflows suggest that buyers are still willing to step in, the wider pattern points to less consistent institutional demand. A sustained return to net inflows would help lift the BTC price.

BTC – technical analysis

Bitcoin continues to hold above the $82K support zone, having recovered from a spike to $79.7K. The broader technical picture remains constructive, with the price above the 200 EMA and respecting the 50 EMA support. The long lower wick on yesterday's candle also suggests that dip buyers stepped in as the price approached $80K.

However, momentum remains neutral, with the RSI drifting back towards 50, leaving the recovery vulnerable to renewed selling pressure.

Should momentum improve, buyers will look to extend gains above horizontal resistance at $84K towards $87K, the September and October highs. A sustained break above this resistance would open the way towards $90K, followed by $95K.

On the downside, a sustained break below the $82K support zone, the August and May highs exposes the 50 EMA around $80K. If sellers settle below this level, attention would turn towards the 200 EMA at $76K. A break below the 200 EMA could see sellers gain traction. 

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