A fresh wave of selling in global bond markets is once again transmitting significant pressure to the cryptocurrency sector. Bitcoin (BTC) briefly dipped below $77,000 during Friday’s Asian trading session, hitting a low of approximately $76,705. Concurrently, the US 10-year Treasury yield is approaching the critical 5% mark, and market odds for a Federal Reserve (Fed) rate hike next week have surged to around 70%. Risk assets are once again confronting valuation headwinds driven by the prospect of “higher interest rates for longer.”
Bitcoin Breaches $77,000 as Macro Pressures Eclipse Internal Crypto Factors
Recent market data indicates Bitcoin is trading around $77,000, reflecting a 24-hour decline of approximately 2-3%. The intraday low touched $76,705. After briefly surpassing $82,000 in early September, BTC has been on a gradual downtrend, with the previous support level of $78,000 now also breached.
Notably, this latest downturn differs from earlier corrections primarily driven by leveraged positions and altcoin sell-offs. The current pressure emanates more distinctly from the global bond market.
Reuters data reveals that the US 10-year Treasury yield climbed to approximately 4.97% on Friday, marking a near three-year high and just a hair’s breadth from the closely watched 5% threshold. The 30-year US Treasury yield has already surpassed this, reaching around 5.36%.
Rising yields signify increased returns on risk-free assets, which is particularly detrimental to high-volatility assets like Bitcoin that do not generate cash flow. As long-term bond yields approach 5%, the risk premium demanded by investors for holding riskier assets also tends to rise in tandem.
Oil Prices Reignite Inflation Concerns, Fed Hike Probability Soars to 70%
One of the primary catalysts behind this bond market sell-off is the renewed sharp increase in energy prices.
Influenced by geopolitical tensions in the Middle East and transportation supply risks, Brent crude oil briefly neared $110 per barrel this week, a substantial increase from its July lows. The resurgence in energy prices has sparked market fears that previously cooling inflation could rebound.
The latest US August Producer Price Index (PPI) showed a month-on-month increase of 0.4% and an annual increase of 5.4%. Following this data release, interest rate futures swiftly repriced Federal Reserve policy expectations.
According to CME FedWatch pricing, the market now assigns approximately a 70% probability to the Fed implementing a 25-basis-point rate hike at its September 15-16 meeting, elevating the federal funds rate target range from 3.50%-3.75% to 3.75%-4.00%. This probability has risen from roughly 50% just a week ago. In essence, the market’s biggest shift is no longer “when will the Fed cut rates,” but rather a renewed focus on “will the Fed hike again?”
10-Year Treasury Yield at 5% Could Be Bitcoin’s Next Macro Pressure Point
Short-term market attention will now pivot to the US August Consumer Price Index (CPI), due to be released on Friday.
Market consensus initially anticipated an overall CPI increase of approximately 0.4% month-on-month, with core CPI expected to rise by about 0.2%. Should core inflation surpass these expectations, the market could further amplify rate hike bets, potentially pushing the 10-year US Treasury yield definitively above 5%.
For Bitcoin, this would represent a more significant signal than merely breaching the $77,000 level.
BTC has already retreated from around $82,000 to the $77,000 vicinity. If US Treasury yields continue their upward trajectory, it implies a further tightening of market financial conditions and an increased attractiveness of the US dollar and bonds to capital. Consequently, Bitcoin’s challenge to reclaim the $80,000 mark would become considerably more difficult.
Conversely, if CPI comes in lower than expected, the 10-year yield fails to break 5%, and rate hike bets recede, the macroeconomic pressures currently weighing on BTC might find temporary relief.
Bitcoin’s next directional move may not solely depend on its ability to hold the $77,000 support level. The true determinants of the next market wave are likely to be whether the US 10-year Treasury yield can remain below 5% and if the market continues to bet on a September rate hike.
Disclaimer: This article is for market information purposes only. All content and views are for reference only and do not constitute investment advice. They do not represent the views or positions of the author or Blockcast. Investors should make their own decisions and trades, and the author and Blockcast will not bear any responsibility for direct or indirect losses resulting from investor transactions.
