Interest rates, which have supported prices for much of 2024, may now be turning into a headwind.
As much of the world celebrated Christmas, Bitcoin (BTC) seemed poised to reclaim the $100,000 mark, having dropped to below $93,000 just before the holiday. However, the rally lost momentum, stalling just above $99,800 as Asia’s markets opened on Thursday morning. It then quickly fell to around $95,000 within a few hours.
At press time, Bitcoin was trading at $95,300, showing a 3.1% drop over the past 24 hours.
The broader CoinDesk 20 Index also experienced declines, falling 4.2% during the same period, with major cryptocurrencies like Ethereum (ETH), Solana (SOL), XRP, Cardano (ADA), and Avalanche (AVAX) showing losses between 4% and 7%.
While U.S. markets opened Thursday, stock index futures indicated modest early losses. Gold and oil prices were slightly up.
The recent price movement in crypto occurred on very low volume, and despite a drop over the past week, Bitcoin has more than doubled year-to-date. However, one potential factor being overlooked in the declines is that the previously favorable impact of lower interest rates may now be working against the market.
The 10-year Treasury yield continued to rise early Thursday, reaching 4.63%, approaching its 2024 high. This marks an increase of nearly 100 basis points since the Federal Reserve cut benchmark short-term rates by 50 basis points in September.
Macro researcher Jim Bianco pointed out that the rapid rise in long-term rates following a Fed rate cut is unprecedented in modern monetary history. “The bond market will keep selling (driving up yields) the more the Fed talks about rate cuts in 2025,” Bianco said. “If the Fed doesn’t back off its rate-cutting rhetoric, bond yields will rise as much as needed to start breaking things—particularly inflation.”
