After a strong start to the month of October and a break above $28,000, Bitcoin (BTC) price has entered a significant decline, falling by 1.87% and trading at around $27,591 at press time. The recent price drop comes as the rise in bond yields has dampened demand for riskier assets.
On Monday, Bitcoin surpassed $28,500, driven by increasing optimism about broader cryptocurrency adoption following the launch of U.S. exchange-traded funds (ETFs) based on Ether futures. However, these products did not generate as much excitement as their Bitcoin counterparts, which were launched back in 2021. Commenting on the development, Cici Lu McCalman, founder of blockchain advisor Venn Link Partners, said:
“The price increase was short-lived as the macroeconomic environment is still restrictive on interest rates. The rise in US Treasury yields weighed on Bitcoin.”
The 10-year U.S. Treasury yield is nearing levels not seen since 2007, reflecting growing expectations of a prolonged period of elevated interest rates by the Federal Reserve to combat inflation. These tighter financial conditions pose challenges for assets such as stocks and cryptocurrencies.
According to Cleveland Fed President Loretta Mester, there is a likelihood that the Fed funds rate will be raised again this year. She emphasizes that policy decisions are influenced by actual progress toward the Fed’s dual mandate goals. This includes assessing whether the significant inflation progress observed over the past three months continues and whether labor market conditions remain robust despite the slowdown.
Will the fourth quarter be good for Bitcoin this time?
Historically, the fourth quarter has been good for Bitcoin and the broader cryptocurrency markets over a long period of time. Bitcoin’s value is up 67% this year, representing a partial recovery from a significant decline in 2022. However, it is still a long way from its all-time high of $69,000, which was reached during the pandemic.
Analysts are finding comfort in Bitcoin’s historic seasonal trends, with October historically being a robust month for the cryptocurrency. Based on data compiled by Bloomberg, Bitcoin has seen an average increase of 24% over the past decade as of October.
According to Kaiko, Bitcoin’s dominance in the US crypto trading landscape is growing, accounting for 71% of trading volume on American exchanges in September. This surpasses the 66% recorded during the banking turmoil in March.
One possible reason for this shift is that institutional traders may be leaning towards Bitcoin due to rising real yields and worsening global risk sentiment, as suggested by Kaiko.
On Monday, Bitcoin managed a strong breakout above $28,000, raising hopes of a next rally to $31,000. However, today’s decline below $27,900 shows that the bulls are not completely in control.
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