Bitcoin, ether soar as rising Treasuries fuel lower risk asset prices

Bitcoin (BTC-USD) and ethereum (ETH-USD) have extended their declines from Friday’s drop in Monday morning trading, although they have recovered slightly from an even deeper decline seen earlier in the session.

Over the past 24 hours, bitcoin (BTC-USD) dipped 0.4% to $21.33K, up from an intraday low of $20.96K, while ethereum (ETH-USD) slipped 2.4% to $1.58,000 at 11:45 a.m. ET, up from a session low of $1.53,000.

“Some believe that the significant sell-off on Friday was caused by Celsius Network, which is in bankruptcy, receiving approval to sell mined Bitcoin to cover their operations,” GlobalBlock analyst Marcus Sotiriou wrote in a note. “It has been speculated that Celsius sold 7,000 Bitcoin on the FTX spot, leading to a cascade of liquidations.”

The stock market also took a beating with the Dow Jones (DJI) -1.3%S&P 500 (SP500) -1.6% and technology-led Nasdaq (COMP.IND) -2% all in red.

The bearish price move also came as US Treasury yields rose slightly above the curve, with the 10-year (US10Y) up three basis points to 3.01% and the two-year (US2Y) up four basis points to 3.31%. Remember that a so-called yield curve inversion, which historically precedes a recession, occurs when short-duration benchmarks yield more than long-term benchmarks. The Eurodollar futures curve is also inverting and has been since March, in a sign that problems in the monetary system are taking hold globally.

Perhaps traders are expecting a hawkish message from the Federal Reserve’s Jackson Hole Symposium on Thursday. Markets are now pricing in a 56.5% probability of a 75 basis point rate hike at the central bank’s September 21 meeting, while there is a 43.5% chance of a 50bp increase, according to CME’s FedWatch tool. At the end of last week, markets braced for a less intense move, with a 47.0% chance of a 75-bp increase versus a 53.0% chance of a 50-bp increase.

Last week, digital asset investment products had smaller outflows totaling $9 million with volumes of $1 billion, according to data from CoinShares. Volumes remain very low as they are 55% down from the 2022 average and the second lowest this year, hence weaker crypto prices.

For crypto-related stocks, Hut 8 Mining (HUT) -7.5%MicroStrategy (MSTR) -4.6%BIT Mining (BTCM) -5.6%Bitfarms (BITF) -7% and Greenidge Generation (GREE) -4.6% made the biggest downside moves during the day.

Earlier, crypto liquidity starts recovery as stablecoin market cap stops falling.