After making a strong start to October and surpassing the $28,000 level, the price of Bitcoin (BTC) has dropped over 2% and is currently trading at $27,619. The recent decline in price is attributed to the surge in bond yields in the US, which has reduced demand for riskier investments.
Increase in US 10-Year Treasury Yield Shakes the Cryptocurrency Market
Bitcoin briefly crossed the $28,500 level due to increased optimism about the adoption of cryptocurrencies following the launch of Ethereum (ETH) futures-based exchange-traded funds (ETFs) in the US. However, Ethereum futures-based ETFs did not generate as much excitement as Bitcoin futures-based ETFs launched in 2021. Cici Lu McCalman, the founder of Venn Link Partners, a Blockchain consulting firm, commented on the development, stating that “the price rally was short-lived due to the hawkish macro environment regarding interest rates. The increase in US Treasury yields put selling pressure on Bitcoin.” Furthermore, this selling pressure has not only affected BTC but also altcoins.
The US 10-year Treasury yield has reached levels not seen since 2007, indicating expectations that the Federal Reserve will keep interest rates at a higher level for a longer period of time in its fight against inflation. Tighter financial conditions are posing challenges for risky assets such as stocks and cryptocurrencies, as anticipated.
According to Cleveland Fed President Loretta Mester, there is a possibility of the Fed raising interest rates again this year. Mester emphasized that policy decisions would be influenced by actual progress towards the Fed’s dual mandate goals. This includes evaluating whether the progress made in suppressing inflation over the past three months continues and assessing the strength of labor market conditions despite moderation.
4th Quarter Could Be Good for Bitcoin
Historically, the fourth quarter has been generally good for Bitcoin and altcoins. Bitcoin has increased its value by 67% since the beginning of the year, undergoing a partial recovery after the major decline in 2022. However, it is still trading well below its all-time high of $69,000 reached during the pandemic.
Experts point out that based on Bitcoin’s price and historical seasonal trends, the turbulent period is considered to have passed, and the current month is historically favorable for the cryptocurrency market. Data compiled by Bloomberg shows that Bitcoin has historically risen by an average of 24% in October over the past 10 years.
Furthermore, Kaiko reported that Bitcoin’s dominance in the US cryptocurrency trading landscape has increased, accounting for 71% of trading volume on US-based exchanges in September. This surpasses the previous record of 66% during the banking crisis in March. Kaiko suggests that one possible reason for this shift is institutional investors turning to Bitcoin due to increasing real yields and worsening global risk sensitivity.