In the latest market movements, Bitcoin (BTC) witnessed a downward adjustment, finding its footing around the $66,000 mark, as market enthusiasts grappled with the resurgence of Treasury yields and the looming prospect of postponed Federal Reserve rate adjustments until later this year. Concurrently, Ether (ETH) hovered just above the $3,300 threshold, and the broader CoinDesk 20 (CD20) index experienced a slight dip of 0.6%, landing at 2,532 points.
A notable spike in the yield of the 10-year Treasury note reaching a two-week zenith of 4.40% was observed, propelled by sustained inflationary pressures and unexpectedly vigorous manufacturing data. Such a surge in Treasury yields typically signals a shift in investor sentiment away from higher-risk assets and traditionally non-yielding investments like gold, though gold has shown resilience in the face of the bearish momentum affecting Bitcoin and the tech-centric Nasdaq index.
Semir Gabeljic, the capital formation lead at Pythagoras Investments, linked Bitcoin’s descent to $65,000 primarily to the current macroeconomic climate surrounding interest rates and the uptrend in Treasury yields, emphasizing that environments characterized by elevated interest rates generally temper the risk appetite among investors.
On the prediction platform Polymarket, the consensus now leans against the likelihood of a rate decrease by May, with opinion evenly divided over the possibility of such a move in June. The prevailing sentiment among bettors is anticipating a rate adjustment in the autumn months.
The CME Fed Watch tool now indicates a 97% probability that interest rates will maintain their current levels following the Fed’s meeting in May. Data from Coinglass revealed a significant unwinding of long positions, amounting to over $245 million in the past 24 hours, which included $60 million worth of Bitcoin positions.
Jun-Young Heo, a derivatives strategist at Singapore-based Presto, pointed out that the funding rates for perpetual futures across most cryptocurrencies have reverted to 1bps, accompanied by a 10% decrease in global futures open interest overnight, suggesting the unwinding of several leveraged long positions.
He further observed that the recent plateau in Bitcoin ETF inflows, coupled with market prices for BTC and ETH dipping below their 20-day moving averages, may have led trend-following traders to interpret the recent downturn as the culmination of a two-month-long bullish streak.
By Andrej Kovacevic
Updated on 23rd April 2024