Bitcoin and other cryptocurrencies experienced a decline on Tuesday, erasing some of their recent gains. This drop followed a surge in bond yields, putting pressure on risk-sensitive assets. Additionally, the lackluster launch of a cryptocurrency exchange-traded fund (ETF) added to the gloomy sentiment.
Bitcoin’s price fell by 3% in the past 24 hours, dropping below $27,600 after reaching $28,500 on Monday. Despite the decline, Bitcoin has been trading within the $26,000 range for the past two months, showing low volatility and volumes. Katie Stockton, managing partner at Fairlead Strategies, highlighted a bullish short-term shift with Bitcoin’s breakout above the 50-day moving average at around $26,500. However, she remains neutral in the long term, emphasizing strong initial support near $25,200.
The recent sell-off in cryptocurrencies can be attributed to profit-taking after Bitcoin reached its highest level since mid-August. Additionally, the surge in Treasury yields negatively impacted riskier assets such as stocks and cryptocurrencies. The yields on the benchmark 10-year U.S. Treasury note reached their highest levels since 2007, exceeding 4.7%. Higher returns on risk-free government debt tend to dampen demand for riskier investments.
The disappointing debut of an ETF holding futures contracts for Ether, the second-largest digital asset after Bitcoin, added to the concerns. While Bitcoin futures ETFs have been available since 2021, seven ETFs trading Ether futures were launched on Monday after receiving clearance from the Securities and Exchange Commission. However, the trading volume for these Ether futures ETFs was relatively low, with less than $2 million traded within the first 15 minutes. This muted launch has raised concerns about declining investor interest in cryptocurrencies.
Analysts had previously anticipated a significant boost to the crypto market with the introduction of a spot Bitcoin ETF. However, the lackluster response to the Ether futures ETFs suggests that this catalyst may not have the anticipated impact. Hal Press, founder of crypto hedge fund North Rock Digital, stated that there is currently very low demand for crypto ETF products due to low retail trading across all markets, low interest in crypto, and poor macroeconomic conditions.
Aside from Bitcoin, other cryptocurrencies also experienced declines. Ether retreated by 4% to $1,660, while smaller tokens had mixed performances, with Cardano dropping 2% and Polygon rising 1%. Memecoins, such as Dogecoin and Shiba Inu, showed weakness with declines of 3% and 4%, respectively.
The overall sentiment in the crypto market appears to be gloomy due to the combination of factors such as bond yield surges, profit-taking, and the lack of enthusiasm surrounding the ETF launches. It remains to be seen how these factors will impact the long-term trajectory of cryptocurrencies.