Bitcoin Back Down to $66K as Rising Treasury Yields Catch Investor Interest

Prediction markets and CME’s Fed Watch Tool are strongly suggesting that a rate cut is unlikely until later this year. Bitcoin remains stable near $66,000, although the CoinDesk20 Index indicates a broader market downturn. The rates and open interest in crypto futures have declined, hinting at a possible conclusion to a two-month upward trend.

During Asian trading hours on Tuesday, Bitcoin (BTC) maintained its position around $66,000 amidst renewed Treasury yields and speculation that the Fed might postpone rate cuts until later in the year. Meanwhile, ether (ETH) was trading above $3,300, and the CoinDesk 20 (CD20) experienced a 0.6% decline, resting at 2,532.

The 10-year Treasury note’s yield reached a two-week high of 4.40% due to persistent inflation and unexpectedly robust manufacturing activity. Typically, an increase in the risk-free rate prompts capital outflows from riskier assets and non-yielding investments like gold. Despite this, gold remained resilient amidst Bitcoin’s weakness and the Nasdaq’s downturn.

Semir Gabeljic, director of capital formation at Pythagoras Investments, attributed Bitcoin’s retracement to $65,000 to the prevailing macroeconomic outlook on interest rates and rising Treasury yields. He noted that higher interest rate environments often dampen investor risk appetite.

In the prediction markets, bettors have dismissed the possibility of a rate cut by May and are evenly split on whether one will occur in June, with most expecting it to happen in the autumn.

According to the CME Fed Watch tool, there’s a 97% probability that rates will remain unchanged after May’s meeting. Coinglass data reveals that over $245 million in long positions were liquidated in the past 24 hours, with $60 million in Bitcoin positions experiencing significant losses.

Jun-Young Heo, a Derivatives Trader at Presto based in Singapore, noted that perpetual futures funding rates for most crypto assets have returned to 1bps, and global futures open interest decreased by 10% overnight, indicating the closure of some leveraged long positions.

“As recent bitcoin ETF inflows are stagnating and BTC and ETH market prices came below the 20-day moving average, some trend followers would have regarded yesterday’s downturn as the end of a two-month-long rally,” he continued.