Bitcoin Fails to Hold $28,000 Amid Bond Yields Surge, Fed Hike Coming?

After a strong beginning to the month of October and sailing past $28,000, the Bitcoin (BTC) price has entered a major retracement dropping by 1.87% and trading around $27,591 at press time. The recent price drop comes as the jump in the bond yields has dented demands for riskier investments.

On Monday, Bitcoin surpassed the $28,500 mark, driven by increased optimism regarding broader cryptocurrency adoption following the launch of US exchange-traded funds (ETFs) based on Ether futures. However, these products did not generate as much enthusiasm as their Bitcoin counterparts introduced back in 2021. Speaking on the development, Cici Lu McCalman, founder of blockchain adviser Venn Link Partners said:

“The price pop was short lived as the macro environment is still hawkish on rates. The rise in US Treasury yields weighed on Bitcoin.”

The 10-year US Treasury yield is approaching levels not seen since 2007, reflecting a growing anticipation of a prolonged period of elevated interest rates by the Federal Reserve to combat inflation. These tighter financial conditions pose challenges for assets like stocks and cryptocurrencies.

According to Cleveland Fed President Loretta Mester, there’s a likelihood of raising the Fed funds rate one more time this year. She emphasizes that policy decisions will be influenced by actual progress toward the Fed’s dual mandate goals. This includes evaluating whether the recent substantial progress in inflation observed over the past three months continues and whether labor market conditions, despite moderation, remain robust.

Will Q4 be Good for Bitcoin This Time?

Historically, the fourth quarter has been good for Bitcoin and the broader cryptocurrency markets for a long period of time. Bitcoin has experienced a 67% surge in value this year, marking a partial recovery from a significant decline in 2022. However, it is still a considerable distance from its all-time high of $69,000 reached during the pandemic.

Analysts are finding comfort in Bitcoin’s historical seasonal trends, with October historically being a robust month for the cryptocurrency. Over the past decade, Bitcoin has, on average, seen a 24% increase in October, based on data compiled by Bloomberg.

According to Kaiko, Bitcoin’s dominance in the US crypto trading landscape is growing, accounting for 71% of trading volumes on American exchanges in September. This surpasses the 66% recorded during the banking turbulence in March.

One possible reason for this shift is institutional traders potentially moving toward Bitcoin due to rising real yields and deteriorating global risk sentiment, as suggested by Kaiko.

On Monday, Bitcoin gave a strong breakout above $28,000 raising hopes for its next rally to $31,000. However, today’s drop under $27,900 shows that the bulls are not entirely under control.