Leading cryptocurrency Bitcoin (BTC) made a strong start to October. It briefly surpassed the $28,000 level before experiencing a major pullback. However, at the time of writing, it is trading around $27,540. This 2.5 percent decline followed a rise in bond yields, which dampened demand for riskier assets. Here are the details…
Bitcoin falls from local highs
On Monday, Bitcoin enthusiasts rejoiced as the cryptocurrency crossed the $28,500 threshold. Fueled by renewed optimism about cryptocurrency adoption. As we at Kriptokoin.com reported, the launch of US exchange-traded funds (ETFs) based on Ethereum futures contributed to this bullish sentiment, although it did not create the enthusiasm that Bitcoin ETFs created in 2021. Cici Lu McCalman, founder of blockchain consultancy Venn Link Partners, commented on this development. “The price boom was short-lived as the macro environment was still hawkish on rates. “The rise in US Treasury yields has put pressure on Bitcoin,” he said.
The yield on 10-year US Treasury bonds is approaching levels not seen since 2007, indicating expectations that the Fed will maintain high interest rates to combat inflation. These tighter financial conditions create challenges for assets such as stocks and cryptocurrencies. Cleveland Fed President Loretta Mester hinted at the possibility of another Fed funds rate hike this year, with policy decisions heavily influenced by progress toward the Fed’s dual mandate goals. This involves assessing whether recent inflationary gains continue and whether labor market conditions, although moderate, remain robust.
There is hope for BTC in the fourth quarter
Historically, the fourth quarter has been favorable for Bitcoin and the broader cryptocurrency market. Bitcoin has gained 67% this year, partially recovering from a significant decline in 2022. However, it remains a significant distance away from its all-time high at $69,000 during the pandemic. Analysts take solace in Bitcoin’s historical seasonal trends, with October being a historically strong month for the cryptocurrency. Over the past decade, BTC has gained an average of 24% in October, according to data compiled by Bloomberg.
Additionally, Bitcoin’s dominance in the US crypto trading landscape is increasing, accounting for 71% of trading volumes on American exchanges in September. This exceeds the 66% recorded during the banking turbulence in March. One possible reason for this change, as Kaiko noted, is that institutional investors are turning to Bitcoin in the face of rising real returns and decreasing global risk sentiment.
Powell speech also affected the markets
In parallel, he met with a variety of stakeholders, including Federal Reserve Chairman Jerome Powell, Philadelphia Fed President Patrick Harker, and workers, small business owners, and community leaders in Pennsylvania. Powell acknowledged that the U.S. economy is still grappling with the fallout from the COVID-19 pandemic, highlighting ongoing challenges in healthcare such as labor shortages, child care accessibility issues and other residual effects of the health crisis. It was noteworthy that Powell refrained from commenting on current monetary policy or the economic outlook.
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