Bitcoin's Price Affected by Rate Hike Expectations

The bond market has signaled that it expects rate hikes, and this is affecting Bitcoin's price. The 2-year Treasury yield has surpassed the federal funds rate since April, which means that rates are expected to rise. This has led to a decrease in spot trading volumes, which have hit their lowest since 2019.

The dollar has been strengthening since May, and Bitcoin's digestion of this dollar rally is nearly the worst on record. Historically, Bitcoin would have risen by this stage, but it is currently deeply in negative territory. The three-month futures basis has also been below the 2-year Treasury yield since February, which means that desks providing leverage to the market are losing interest.

The cost basis distribution chart shows that Bitcoin is trading within the heaviest single cluster on the chart, with a breakeven line at $69,000 above. The long-term holder half of this range is patient supply, while the short-term holder half is more sensitive and in unrealized loss. Above this range lies a real supply wall further up at $83,000-$86,000.