Bitcoin, Ether See Bull Breather as Higher Bond Yields Support Dollar
Major cryptocurrencies traded with moderate losses on Monday, while the dollar index tracked higher government yields as the market became more comfortable with the Federal Reserve continuing its liquidity tightening cycle in May.
CoinDesk’s bitcoin (BTC) price index fell below $30,000, registering a 1.7% drop on a 24-hour basis. Ether (ETH), the native token of Ethereum’s blockchain — which successfully implemented the Shapella hard fork last week — fell nearly 1.8% to $2,084.
The DeFi Dominance Index, which measures the market capitalization of a basket of top decentralized finance coins as a percentage of the total market, held steady at around 4.3%, according to data source TradingView. The US Securities and Exchange Commission (SEC) on Friday reopened a proposal from last year to explicitly target decentralized finance (DeFi).
In traditional markets, the dollar index, which measures the dollar’s exchange rate against the majors, rose to 101.80, extending Friday’s 0.5% jump from 101.00. The yield on the two-year note rose nearly five basis points to 4.16%, extending last week’s 15 basis point gain. The yield on the 10-year note rose to a one-month high of 3.54%. Bond yields began rising on Friday after Fed Governor Christopher Waller said the central bank has not made much progress in bringing inflation down to its 2% target and must raise rates further.
Traders priced an 85% probability that the Fed will raise interest rates by 25 basis points to the new range of 5% to 5.25% versus 66% seen after the release of inflation data on Wednesday, according to CME’s FedWatch tool. The central bank has raised interest rates by 475 basis points over the past 12 months, injecting volatility into risk assets, including cryptocurrencies.
“The 10-year Treasury yield is quietly climbing again,” Markus Thielen, head of research and strategy at crypto services provider Matrixport, said in a daily market update. “This needs monitoring in the form of a warning sign.”
“We will consider taking some profits as the crypto market shows exuberant signs,” Thielen added. “Ideally, the delta should be replaced with upside spreads in case prices continue to rise.”
Per Alex Kuptsikevich, senior market analyst at FxPro, bitcoin may struggle to establish a foothold above the previous support-resistance of $30,000 in the near term.
“Traders should be prepared that the $30,000 mark for the first cryptocurrency could act as solid resistance after it was stiff support in 2021,” Kuptsikevich said in an email.
Over the weekend, tech billionaire, Twitter CEO and longtime crypto proponent Elon Musk said that US government agencies had full access to Twitter user activity, including direct messages (DMs). The shocking revelation came days after social trading platform eToro announced plans to offer crypto trading services to Twitter users.
