Bitcoin Market Hits New Low as Bond Market Prices Rate Hikes

The Bitcoin market has been silent lately, with spot trading volumes hitting a new low since 2019. This is despite the recent rally in the cryptocurrency's price. According to Glassnode, this is not a deep bear market, but rather a shallow one that has not yet reached the levels of previous cycles.

The bond market has been pricing in rate hikes, which is unusual for a market expecting rate cuts. This has led to a decrease in marginal buyers, causing the sell-side order book depth to thin significantly. The 2-year Treasury yield has been above the federal funds rate since April, with the gap between them being the widest since November 2022.

The US dollar has been strengthening since May, and Bitcoin's digestion of this dollar rally is nearly the worst on record. In typical precedents since 2015, Bitcoin would have risen by this stage. This time, it is deeply entrenched in negative returns, with only 3 out of the last 20 similar rallies being worse.

The three-month futures basis has been below the 2-year Treasury since February, which historically leads to a decrease in desks providing leverage and volume to the market. The cost basis distribution chart shows that Bitcoin is trading within the heaviest single cluster on the chart, approximately in the $62,000 to $68,000 range.