The 10-year Treasury note's yield surged to a two-week high of 4.40%, propelled by persistent inflation concerns and unexpectedly robust manufacturing activity. Typically, a rise in the risk-free rate triggers capital outflows from high-risk assets like Bitcoin and non-yielding investments such as gold. Despite this, gold exhibited resilience amidst Bitcoin's downturn and a subdued performance in Wall Street's tech-heavy Nasdaq index.
Semir Gabeljic, Director of Capital Formation at Pythagoras Investments, attributes Bitcoin's retreat to $65,000 to the prevailing macroeconomic outlook, particularly concerning interest rates and escalating Treasury yields. In environments of heightened interest rates, investor appetite for risk tends to diminish, affecting asset valuations across various markets.
Prediction markets, such as Polymarket, suggest that a rate cut before May is unlikely, with opinions divided on the possibility of one in June. The CME Fed Watch tool echoes this sentiment, indicating a 97% probability of rates remaining unchanged after May's meeting.
According to Coinglass data, over $245 million in long positions have been liquidated in the past 24 hours, with $60 million worth of Bitcoin positions being affected. Jun-Young Heo, a Derivatives Trader at Singapore-based Presto, notes a decline in perpetual futures funding rates for most crypto assets, alongside a 10% decrease in global futures open interest overnight. These indicators suggest the closure of leveraged long positions amidst market uncertainty.
Heo further observes that stagnating inflows into bitcoin ETFs, combined with BTC and ETH market prices falling below the 20-day moving average, may have led some trend followers to view the recent downturn as the conclusion of a two-month rally.