Bitcoin's Q4 Outlook Darkens as Yields and Rate Hikes Weigh on Crypto

The crypto market is facing increased pressure due to rising yields and rate-hike fears. The U.S. 2-year Treasury yield climbed to 4.734% after the Federal Reserve's recent 25 bps hike, its highest level in 26 months.

This has sparked concerns that further increases could tighten financial conditions, especially with U.S. government debt exceeding $30 trillion. The bigger signal, however, is coming from the 10-year Treasury yield, which broke above 5% and may continue to rise, according to analysis from the Kobeissi Letter.

The move above 5% is a crucial technical signal suggesting that rising yields could put pressure on liquidity and risk assets such as crypto. Meanwhile, the U.S. Dollar Index crossed 100 for the first time in over four weeks, indicating a stronger dollar could reduce demand for risk assets.

The broader macro setup is weighing on crypto's September ROI, with traders hoping to see a green close in the month of September to mark the end of the bear phase and the beginning of the new bull run. However, Bitcoin's key metrics highlight that traders may already be positioning for this move, with Open Interest jumping by approximately 10k following the FOMC announcement.

According to Glassnode's latest data, Bitcoin's short-term holder cost basis is currently at the crucial level of about $70k. If BTC breaks below this level, these holders could move into unrealized losses, increasing the risk of selling pressure and potential liquidations.