Bitcoin Plummets Below $98,000 Amid Rising Treasury Yields: What It Means for Investors

Bitcoin's Decline

Bitcoin experienced a significant drop on Tuesday, falling 4.8% to $97,183.80 due to a spike in Treasury yields that negatively impacted risk assets across the board. The broader cryptocurrency market, as indicated by the CoinDesk 20 index, also saw a decline of over 5%.

Impact on Crypto Stocks

Major crypto stocks took a hit as well, with Coinbase and MicroStrategy falling more than 7% and 9% respectively. Bitcoin mining companies like Mara Holdings and Core Scientific also experienced declines of about 5% each.

Treasury Yields and Economic Data

The downturn followed a sudden increase in the 10-year U.S. Treasury yield after data from the Institute for Supply Management showed faster-than-expected growth in the U.S. services sector for December. This growth raised concerns about persistent inflation, which tends to pressure growth-oriented risk assets like Bitcoin.

Bitcoin had been trading above $102,000 earlier in the week, and many investors remain optimistic about the potential for prices to double this year, driven by expectations of clearer regulations supporting digital assets and related stocks such as Robinhood.

Fed Rate Cuts and Bitcoin's Future

However, uncertainty regarding the Federal Reserve's interest rate cuts could pose challenges for cryptocurrency prices. The Fed has indicated that while it is cutting rates for the third time, it may implement fewer cuts in 2025 than previously anticipated. Historically, rate cuts have positively influenced Bitcoin prices, while rate hikes have had the opposite effect.

As of now, Bitcoin is up over 3% since the beginning of the year and has recorded an impressive 120% gain for 2024.