Bitcoin and Cryptocurrencies Face Pressure Amid Bond Yield Surge

Bitcoin and other cryptocurrencies experienced a decline on Tuesday, erasing some of the recent gains seen during a rally. The drop in prices can be attributed to the surge in bond yields, which has put pressure on risk-sensitive assets. Adding to the negative sentiment is the lackluster debut of a cryptocurrency exchange-traded fund (ETF).

Over the past 24 hours, the price of Bitcoin has fallen by 3%, dropping below $27,600 after reaching a high of $28,500 on Monday. Despite this decline, Bitcoin remains comfortably above the $26,000 threshold that has characterized trading for almost two months. This period has been marked by exceptionally low volatility and trading volumes.

According to Katie Stockton, managing partner at technical research firm Fairlead Strategies, Bitcoin has experienced a bullish short-term shift by breaking out above the 50-day moving average at around $26,500. She further adds that initial support is strong near $25,200, while maintaining a long-term neutral stance.

In addition to profit-taking following Bitcoin's surge to its highest level since mid-August, cryptocurrencies have also faced selling pressure due to the rise in Treasury yields. This trend has affected not only the Dow Jones Industrial Average and S&P 500 but also cryptos. The yield on the benchmark 10-year U.S. Treasury note climbed above 4.7% on Tuesday, reaching its highest level since 2007. Higher returns on low-risk government debt typically reduce the demand for riskier investments such as stocks or cryptocurrencies.

Further concerns arise from the lackluster launch of an ETF that holds futures contracts for Ether, the second-largest digital asset after Bitcoin. While Bitcoin futures ETFs have been in existence since 2021, seven ETFs holding Ether futures began trading on Monday after receiving clearance from the Securities and Exchange Commission (SEC).

The Launch of Ether Futures ETFs Raises Concerns about Crypto Investor Interest

The recent launch of Ether futures ETFs has left traders underwhelmed, serving as yet another indication that investor interest in cryptocurrency is on the decline. According to Eric Balchunas, an ETF analyst at Bloomberg, the seven funds collectively saw less than $2 million in dollar value traded within the first 15 minutes. While this is a typical scenario for a new ETF, the low volume relative to the ProShares Bitcoin Strategy ETF, which generated $200 million in volume during its initial 15 minutes of trading, is noteworthy.

This lackluster performance of Ether futures ETFs has cast doubts on the significance of crypto ETF debuts as a catalyst for market growth. This skepticism stems from the contrasting performance of Bitcoin over the summer, which experienced substantial gains amidst anticipation for the first spot Bitcoin ETF. If the crypto ETF debuts fail to live up to expectations, it suggests that analysts may have overestimated their impact.

Hal Press, the founder of crypto hedge fund North Rock Digital, believes that the current environment characterized by low retail trading across all markets, declining interest in cryptocurrency, and poor macroeconomic conditions is to blame for the lack of demand for crypto ETF products. He argues that despite the unique features of these products, their appeal remains limited. Consequently, Press cautions against placing too much emphasis on the potential Bitcoin spot product as a transformative force in the market.

In addition to these developments, Ether experienced a 4% decline, trading at $1,660. Smaller tokens displayed mixed performance, with Cardano dropping 2% and Polygon recording a 1% increase. Memecoins showed weakness, with Dogecoin declining by 3% and Shiba Inu falling by 4%.

Written by Jack Denton