• Bitcoin tumbled over $5,000 in 24 hours as interest rates jumped
• Rising Treasury yields and strength in the U.S. dollar contributed to Bitcoin’s decline
• Bitcoin-related stocks like Coinbase, MicroStrategy, Marathon Digital, and Riot Platforms also fell
Bitcoin tumbled for a second straight day on Tuesday, falling more than 6% to $45,500 amid a spike in Treasury yields and strength in the U.S. dollar. The sell-off comes after bitcoin hit an all-time high in mid-March.
Bitcoin Extends Losses
The flagship cryptocurrency dropped over $5,000 on Tuesday, bringing its two-day decline to around 7%, according to Coin Metrics. On Monday morning, bitcoin was trading at about $70,000 before economic data showed growth in manufacturing and bets on Federal Reserve rate cuts cooled. Bitcoin is now off its record high from March 14 by about 11%.
Ether followed bitcoin lower, losing 4.5% to trade at $3,319. Meanwhile, the 10-year Treasury yield hit its highest level of the year. The U.S. dollar, which tends to weaken bitcoin, reached its strongest level in almost five months.
Factors Behind the Decline
According to Joel Kruger, market strategist at LMAX Group, bitcoin’s pullback is not surprising after its explosive rally in the first quarter. Strengthening economic data and persistent inflation have led to higher expectations for Fed rate hikes, boosting the dollar versus bitcoin.
Bitcoin’s drop may have been exacerbated by a large holder transferring over 4,000 bitcoin to the Bitfinex exchange late Monday. This type of on-exchange inflow often precedes selling pressure.
Impact on Related Assets
Stocks tied to bitcoin felt the pain of its decline. Crypto exchange Coinbase fell 4% while MicroStrategy, which holds bitcoin on its balance sheet, lost nearly 7%. Leading bitcoin miners Marathon Digital and Riot Blockchain dropped 7% and 6%, respectively.
April could bring further volatility, especially for miners, as the bitcoin halving approaches. The event cuts miner revenue but has preceded huge bitcoin rallies in the past. Despite recent weakness, bitcoin is still up 53% in 2022.
