What’s the reason for Bitcoin’s slide back to $66,000?

Author: Sam Reynolds, CoinDesk; Compiled by Baishui, Golden Finance

• Bitcoin hovers around $66,000, with the CoinDesk20 index signaling broader market weakness.

• Crypto futures rates and open interest have fallen, signaling a possible end to a two-month rally.

Bitcoin (BTC) continued to fall during Asian trading hours on Tuesday, trading around $66,000 as traders digested a rebound in U.S. Treasury yields and the possibility that the Federal Reserve could delay rate cuts until later this year.

As of writing, Ethereum (ETH) was changing hands for more than $3,300, while the CoinDesk 20 (CD20) was down 0.6% at $2,532.

The 10-year Treasury yield hit a two-week high of 4.40% overnight on persistent inflation and unexpectedly strong manufacturing activity. A rise in so-called risk-free rates typically spurs outflows from risky assets and zero-yielding investments like gold. Yet the yellow metal has remained resilient amid weakness in bitcoin and Wall Street’s tech-heavy Nasdaq.

“Bitcoin’s pullback to $65,000 is largely attributable to the near-term macro outlook for interest rates and rising Treasury yields,” Semir Gabeljic, director of capital formation at Pythagoras Investments, said in an email interview. “A higher interest rate environment typically reduces risk appetite among investors.”

On Polymarket, bettors have ruled out a rate cut in May and are evenly split on whether there will be a cut in June. Most of the bets are on the fall.

(Polymarket)

The CME Fed Watch tool shows a 97% chance of keeping interest rates unchanged after the May meeting.

Coinglass data shows that over $245 million of long positions have been liquidated in the past 24 hours, including $60 million of BTC positions.

Jun-Young Heo, a derivatives trader at Presto in Singapore, added: “Perpetual futures funding rates for most crypto assets are back to 1bp and global futures open interest fell 10% overnight, suggesting some leveraged long positions have been unwound.”

“With recent stagnation in Bitcoin ETF inflows and BTC and ETH market prices below their 20-day moving averages, some trend followers may view yesterday’s downturn as the end of a two-month-long rally,” he continued.