Bitcoin Slips as Yields and Dollar Rise, Setting Stage for Further Rate Hikes
Bitcoin's recent eight-month high of around $87,000 was short-lived as the cryptocurrency dropped roughly 4% to an intraday low near $83,200 on September 23-24. This decline coincided with a sharp increase in US Treasury yields and the dollar, which served as a reminder that macroeconomic factors still play a significant role in shaping the crypto market.
The 10-year Treasury yield surged to levels not seen since 2007, reaching between 5.11% and 5.13%. This rise was driven by stronger-than-expected US economic data, including an S&P Global flash composite PMI reading of 58.4, its strongest mark since July 2021.
The Federal Reserve's hawkish stance was reinforced by comments from Governor Michael Barr, indicating that additional rate hikes could still be on the table. Market-implied odds of a rate hike at the October 28 Fed meeting jumped to around 70-75%, significantly higher than just weeks ago when traders were pricing in a more benign path.
The recent pullback is notable despite enormous institutional demand, with US spot Bitcoin ETFs recording net inflows exceeding $2.3 billion over four consecutive trading days leading up to the decline. This disconnect between ETF demand and price action suggests that institutional buyers are accumulating, but the marginal price of Bitcoin is currently being set by macro traders reacting to yields and dollar moves.