Bitcoin Price Drops From an 8-Month High as Yields and Dollar Rise

Why Is Bitcoin Falling After Hitting an Eight-Month High?

When safe US government bonds offer yields above 5%, riskier assets that do not pay interest, such as Bitcoin, can become less attractive. The decline was then amplified by traders who had borrowed heavily to bet on further gains and were forced to close their positions as prices fell.

Treasury Yields Hit a 19-Year High

A Treasury yield is the annual return investors receive for lending money to the US government. On Wednesday, September 23, S&P Global's flash Composite PMI rose to 58.4, its strongest level in more than five years. 

Services came in at 58.7, while manufacturing reached 57.0. A PMI above 50 indicates that business activity is growing. Companies' input costs also increased at their fastest pace in four years.

The 10-year Treasury yield closed at 5.11%, up from 4.96% on Tuesday, while the 20-year yield is approaching 5.5%.

Fed Hike Bets Climb Toward Four More Increases

The Federal Reserve raised interest rates by 25 basis points (0.25 percentage point) on September 16. The CME FedWatch tool, which uses futures prices to estimate the market's rate expectations, now points to a 4.75% to 5% range by June 2027, implying four more quarter-point hikes.

Bas Kooijman of DHF Capital said October hike odds rose to around 70%, up from roughly 55% a day earlier. The US dollar index also climbed above 101. According to Chris Williamson, chief business economist at S&P Global Market Intelligence, quoted by Yahoo Finance,

"Firms' input costs have meanwhile jumped in September at the steepest rate for four years, with fuel and transport costs spiking higher thanks to the rise in oil prices seen during the month, which will add further to the upward pressure on selling prices and inflation in the coming months."

A Leverage Flush Turns a Dip Into a Drop

A liquidation occurs when an exchange automatically closes a trader's leveraged position after losses become too large. According to bloomingbit report, $135.8 million worth of crypto positions were liquidated in the hour after Wednesday's data was released. Of that amount, $125.9 million came from bullish "long" positions.

Over 24 hours, total liquidations reached $510 million across 122,256 traders, with long positions accounting for $363.83 million.

A $15.6 Billion Options Expiry Adds Fresh Risk

Around 182,000 BTC in options, roughly 106,200 calls and 75,900 puts, are set to expire on Deribit at 4:00 a.m. ET on Friday, according to Decrypt. ‘Max pain’, the price level where the largest number of options expire worthless, is at $76,000.

Technical Indicators

In the short term, however, momentum has weakened. Bitcoin has slipped into Glassnode's $84,000 to $85,000 on-chain support zone, while $77,000 is the next potential floor if that zone breaks, according to CryptoSlate.

Resistance: $85,000, $87,300

Support: $82,873, $79,500

What Should Crypto Traders Do Now?

• Medium-impact News ahead US Durable Goods Orders for August are due at 8:30 a.m. ET on Friday, September 25, followed by the final University of Michigan Consumer Sentiment reading at 10:00 a.m. ET. Durable goods previous: +1.1%, forecast:. Michigan sentiment preliminary: 47.8, forecast.
• If Bitcoin reclaims $85,000 and holds above it after the options expiry, the price could retest the $87,300 high. Large holders could provide additional support, with Santiment data showing wallets holding 100 to 1,000 BTC have added 113,950 BTC since July 15.
• If Bitcoin breaks below $82,873, the $79,500 area near the 20-day EMA could come into focus, followed by Glassnode's $77,000 level if selling pressure continues.
• If Friday's US data comes in stronger than expected and pushes yields higher again, Bitcoin could face more selling pressure. Softer economic data, on the other hand, could give the market some breathing room.
• Next week's calendar includes JOLTS job openings and Consumer Confidence on Tuesday, September 29, at 10:00 a.m. ET. On Wednesday, September 30, traders will watch ADP employment, the third GDP estimate, and PCE inflation the Federal Reserve's preferred measure of price growth from 8:15 to 8:30 a.m. ET.