The US Treasury Yield has reached levels not seen since 2007 thereby denting the demand for riskier assets such as Bitcoin and altcoins.
After a strong start to October and Q4 2023, Bitcoin (BTC) price has dropped by 3% in the last 24 hours moving under $28,000. This happened amid some profit-taking as well as the global macro setup and the rising bond yield.
Cryptocurrency markets experienced a Monday rally driven by optimism surrounding ETFs, which traders hoped would inject fresh enthusiasm and capital into an otherwise lackluster environment. Some even referenced the historical pattern of price surges in October, hoping for a recurrence of this phenomenon.
However, skeptics argue that such optimism always carries the risk of disappointment. In a message to CoinDesk, Lucas Kiely, chief investment officer of Yield App, said:
“October is also typically a good month for the cryptocurrency market. Indeed, it is dubbed “uptober” by market insiders. Only twice since 2013 has bitcoin closed at a loss in October, and hopefully, this year will see a continuation of that trend.”
Maro Environment Dampens Bitcoin Price Rally
The surge in the US bond yields has significantly dampened the demand for riskier investments. The 10-year US Treasury yield is approaching levels not seen since 2007, indicating increasing anticipation of an extended period of elevated Federal Reserve interest rates aimed at curbing inflation.
These tighter financial conditions pose challenges for assets such as stocks and cryptocurrencies. Speaking to Bloomberg, Cici Lu McCalman, founder of blockchain adviser Venn Link Partners said:
“The price pop was short lived as the macro environment is still hawkish on rates. The rise in US Treasury yields weighed on Bitcoin”.
Cleveland Fed President Loretta Mester has suggested that there might be a need to increase the Fed funds rate once more this year. She emphasized that policy decisions should be driven by real progress regarding their dual mandate goals. Specifically, they will closely monitor whether the recent positive momentum in inflation over the past three months is sustained and if labor market conditions remain healthy even as they moderate.
Bitcoin in Q4 2023
Historically, the last quarter of the year has always been bullish for Bitcoin and the broader cryptocurrency market. Bitcoin has experienced a 67% surge this year, a notable recovery from its downturn in 2022, although it’s still distant from its peak during the pandemic.
Historical data enthusiasts find comfort in Bitcoin’s seasonal trends, especially in October, where it typically shows strength. Over the past ten years, Bitcoin has averaged a 24% increase in October, based on Bloomberg’s data.
According to Kaiko, Bitcoin’s dominance in US crypto trading is growing, accounting for 71% of trading volumes on American exchanges in September. This surpasses the 66% level seen during the financial turmoil in March.
One possible reason for this shift is institutional traders turning to Bitcoin due to rising real yields and increasing global risk concerns, as suggested by Kaiko.
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