The strong gains in US government bonds are exerting pressure on the crypto market via detours.
The crypto market is facing further selling pressure after the yield on 10-year US government bonds recently climbed to a multi-month high .
The latter is a disadvantage for high-risk investment products such as cryptocurrencies
As the data from Cointelegraph Markets and TradingView show, Bitcoin ( BTC ) slipped to an interim low of 44,710 US dollars on February 25, before new buying interest in the market-leading cryptocurrency rose again above 46,500 US dollars, where the price is currently leveling off . The analysts believe, however, that it takes a jump above the $ 50,000 mark for the upward trend to continue, otherwise further losses threaten.
Although well-known companies such as MicroStrategy, Tesla and MassMutual have invested heavily in recent months, most large companies do not yet dare to invest in Bitcoin. Damien Vanderwilt, the co-president of Galaxy Digital suggests that there are two main reasons for this.
Nonetheless, the increased interest of institutional investors is one of the mainsprings for the soaring of the crypto industry in the year 2021. However, their influence could possibly be overrated, because small and large stablecoin investors in particular have the most purchasing power .
Government bonds are depressing the crypto market
The yield on 10-year US Treasuries climbed to 1.52% on February 25, the highest level in a year.
As Chad Steinglass, Head of Trading at CrossTower, explains, this has created selling pressure that „temporarily pushed the price difference of the Grayscale Bitcoin Mutual Fund (GBTC) into minus 6%, ultimately closing it at -2%“ . Clear evidence that government bonds have had an indirect impact on the crypto market by triggering a cascade of increasing.
Market visualization from Coin360
Due to the massive increase in returns, the stock market initially came under pressure, because traders suddenly needed liquidity and therefore liquidated their positions in order to get back to money quickly.
“I interpret the downturn in the price differential of the GBTC as a sign that private investors are selling in order to create liquidity. Another reason could be that other large mutual funds like ARKW are experiencing capital outflows, which is why they are selling their shares in GBTC. „
Only Cardano wins
However, US 10-year Treasury yields fell 0.0582 basis points on February 26, a 3.82% decline from the previous day. This enabled the stock market to recover slightly, with the major stock indices recently sending mixed signals.
At the time of going to press, the NASDAQ was up 0.56%, which meant that the 3.5% loss from the previous day could be retracted somewhat. The S&P 500 and the Dow Jones, on the other hand, have to come to terms with further losses of 0.48% and 1.51%.
Similarly, the majority of the crypto market also lost on Friday. The only notable exception is the Cardano ( ADA ) blockchain project, which jumped to a new record high of 1.29 US dollars and became the third largest cryptocurrency of all. The trigger is probably the hype about a major upgrade that is due to take place on March 1st.