Rising Yields Dent Crypto Rally

• Bitcoin and Ethereum face losses as Treasury yields rise, potentially curbing crypto market enthusiasm.
• Traders re-evaluate positions amid rate cut expectations, with the Fed potentially holding rates steady.
• Crypto futures show decreased open interest and funding rates, indicating a potential end to the recent rally.

Discover why Bitcoin and Ethereum are retreating, how the latest Treasury yield increase impacts sentiment, and what the market signals could mean for the crypto landscape in this in-depth analysis.

BTC and ETH Slump Amid Revived Treasury Yield Strength

Bitcoin (BTC) and Ethereum (ETH) nursed losses during Asian trading hours on Tuesday, with BTC hovering around $66,000 and ETH trading above $3,300. This comes as traders grapple with the resurgence of Treasury yields and revised expectations that the Federal Reserve might not cut interest rates as early as anticipated.

Rate Hike Pressures and Market Reaction

The 10-year Treasury note yield hit a two-week high of 4.40% overnight, fueled by stubbornly persistent inflation and robust manufacturing activity. Rising yields in “risk-free” assets like Treasuries often trigger capital outflows from riskier assets and non-yielding investments like gold and cryptocurrencies.

Expert Analysis and Market Signals

“This Bitcoin pullback to $65,000 can largely be attributed to the revised macro outlook on interest rates and Treasury yields,” explains Semir Gabeljic, Director of Capital Formation at Pythagoras Investments. “Elevated interest rate environments generally dampen investor enthusiasm for risk assets.”

Market indicators on platforms like Polymarket and analysis from CME’s Fed Watch Tool strongly suggest no rate cuts before fall. Coinglass data reveals over $245 million in long position liquidations within the past 24 hours, including $60 million in BTC positions.

Potential Trends and Outlook

“Crypto futures funding rates are back to 1bps, and global futures open interest dropped 10% overnight, signifying the closure of some leveraged long positions,” states Jun-Young Heo, Derivatives Trader at Presto. “With Bitcoin ETF inflows slowing and BTC and ETH falling below their 20-day moving averages, trend-following traders may view this downturn as a signal that the two-month rally has ended.”

Conclusion

The recent dip in Bitcoin and Ethereum underscores the complex interplay between cryptocurrencies and traditional financial markets. While the long-term trajectory of crypto remains a topic of debate, watching Treasury yields and their impact on Fed policy will be crucial for traders and investors to navigate the crypto landscape in the coming months.