Impact of Rising Treasury Yields on Bitcoin and Cryptocurrency Markets
On Tuesday, Bitcoin’s price fell due to rising Treasury yields, reflecting a wider downturn in tech stocks and cryptocurrencies. Bitcoin had initially surged in anticipation of a pro-crypto Congress but subsequently retraced gains as market fears over inflation emerged, impacting risk assets broadly.
On Tuesday, Bitcoin (BTC) experienced a decline as a result of rising Treasury yields, which negatively impacted the tech-heavy Nasdaq Composite, causing it to drop nearly 2%. This downturn was not limited to Bitcoin; other cryptocurrencies such as Ethereum, Ripple, and Solana also suffered significantly, with Ethereum declining close to 8% and Solana nearly 10%. Prior to this drop, Bitcoin had seen a brief surge following the swearing-in of a new Republican Congress perceived as pro-cryptocurrency. However, optimism quickly waned as a spike in bond yields generalized downtrends across risk assets, including cryptocurrencies.
Bitcoin’s ascension to over $102,500 on Tuesday morning had been fueled by initial enthusiasm surrounding the new Congress. Ripple Labs’ CEO, Brad Garlinghouse, referred to this Congress as “the most pro-crypto Congress in history.” Nevertheless, reports of increased economic growth led to concerns regarding potential inflation, prompting investors to sell Treasury bonds, which in turn produced rising yields and exacerbated the sell-off in both stocks and cryptocurrencies.
The relationship between Treasury yields and cryptocurrency prices often indicates a broader trend impacting risk assets. As bond yields rise due to falling prices, investors often move away from higher-risk investments, such as cryptocurrencies, and shift back towards safer assets like Treasury bonds. This market behavior was evidenced on Tuesday when positive economic indicators prompted fears of inflation, leading to a sell-off in risk assets, including the cryptocurrency market.
In summary, Bitcoin’s price slump on Tuesday can be attributed to rising Treasury yields that coincided with market reactions to economic reports suggesting quicker-than-expected growth. While there was initial excitement surrounding the newly elected pro-cryptocurrency Congress, this sentiment quickly dissipated as concerns over inflation grew. Consequently, riskier assets suffered as investors sought refuge in government bonds.
Original Source: cryptopotato.com
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