Bitcoin Struggles Under Pressure: Drops Below $98,000 As Treasury Yields Climb

Bitcoin (BTC) experienced significant volatility on Tuesday, dropping 4.8% to $97,000 once again after briefly surging above $100,000 to start the week.

Major crypto stocks, including Coinbase and MicroStrategy, also saw sharp declines, falling more than 7% and 9%, respectively. Bitcoin mining companies such as Mara Holdings and Core Scientific were not spared either, each dropping around 5%.

According to recent reports, the downturn in Bitcoin’s price coincided with a sudden spike in the 10-year US Treasury yield. This increase followed data from the Institute for Supply Management (ISM), which indicated faster-than-expected growth in the US services sector for December. 

This news has raised concerns about persistent inflation, which tends to pressure growth-oriented risk assets like cryptocurrencies. Historically, rising Treasury yields have had an inverse relationship with risk assets such as Bitcoin. 

On Monday, Bitcoin had traded above $102,000 and is widely anticipated to double this year, contingent on clearer regulations that could bolster digital asset prices. However, uncertainty surrounding the Federal Reserve’s (Fed) interest rate cuts poses potential challenges for Bitcoin’s price trajectory. 

In December, the Fed indicated that while it was cutting rates for a third time, the pace of future cuts might be slower than investors had hoped. Rate cuts typically support Bitcoin prices, whereas hikes tend to exert downward pressure.

Analysts further attribute the recent dip not only to rising yields but also to increasing correlations between Bitcoin and traditional equities, particularly the Nasdaq. 

Bob Wallden, head of trading at digital-assets firm Abra, noted that the ISM data triggered a selloff in equities that spilled over into the crypto market. 

Wallden suggests that this decline was compounded by profit-taking and stop-loss triggers for traders who had gone long on Bitcoin above the $100,000 mark.

Adding to the market’s volatility are renewed headlines surrounding President-elect Donald Trump’s shifting stance on tariff discussions, which have further fueled cautious sentiment in the Bitcoin market. 

Bitcoin’s record-breaking rally in 2024 began to lose momentum in late December, as investors capitalized on their profits. Optimism surrounding a pro-crypto administration under Trump had previously driven Bitcoin to an all-time high of $108,000 in December. 

However, Bloomberg reports that the cryptocurrency’s prospects for 2025 will depend largely on whether Trump follows through on his pledges regarding cryptocurrency, including the establishment of a national Bitcoin stockpile.

Despite the optimism, skepticism remains. A recent MLIV Pulse survey revealed that 39% of respondents believe Bitcoin, once a winning investment of 2024, is most likely to become a losing investment in 2025, the highest percentage among various assets surveyed.

Against this backdrop, market analysts like Ali Martinez have noted potential support for Bitcoin at around $97,000, with the TD Sequential indicator signaling a buy opportunity on the hourly chart. 

If this support level holds, there may be a rebound. However, Martinez asserts that a break below the $97,000 price level could signal a potential dip all the way down to the $92,000 support.

Featured image from DALL-E, chart from TradingView.com