Investors avoid risk, U.S. bond yields soar, Bitcoin falls below $40,000

Bitcoin continued its decline on Monday, falling below $40,000 for the first time since mid-March. Meanwhile, the U.S. dollar index (DYX) rose above 100 for the first time since May 2020, and the 10-year U.S. Treasury yield reached a three-year high early Monday, surging to 2.78%.

When yields rise, riskier assets tend to fall. On Monday, the tech-heavy Nasdaq Composite Index, which includes stocks such as Tesla and Microsoft, fell more than 2%. Bitcoin and the Nasdaq 100 move closely together, and the poor performance of technology stocks has dragged down the riskier crypto market.

Data from the Bitpush terminal showed that as of press time, Bitcoin fell to an intraday low of $39,818, down more than 7% in 24 hours and 42% from its record high.

The dollar's continued rise highlights the strong risk aversion in the market as investors weigh the risks of rising interest rates, soaring inflation and the war between Russia and Ukraine leading to chaos in global financial markets.

“Concerns about rising interest rates and expectations of tighter monetary conditions remain a focus for bitcoin investors, ” Nydig, an asset manager focused on bitcoin, said in a report.

Jan Hatzius, chief economist at Goldman Sachs Group Inc., said the Federal Reserve will raise its benchmark interest rate by 50 basis points in May and June to reduce inflation.

Galaxy Digital CEO Mike Novogratz said that if the Federal Reserve pauses in its monetary tightening, Bitcoin prices could rise again. However, with inflation remaining high, the central bank may not change course anytime soon.

Miners participating in the sell-off?

CryptoQuant analysts noted that the “miner outflow” indicator, which measures the total amount of Bitcoin flowing out of miner wallets, suggested that miners appeared to be one of the sellers before Bitcoin fell.

When the value of this metric spikes, it means that miners are moving large amounts of coins from their wallets, a trend that can be negative for the price of cryptocurrencies as it can be a sign of selling by these original whales. Low values ​​indicate normal or healthy selling by miners.

The chart below shows the trend of the miner outflow indicator over the past few months:

The above chart shows that the indicator appears to have spiked in recent weeks, suggesting that miners appear to have played a role in the sell-off that has sent Bitcoin below $40,000.

Continue to fall to $30,000

According to BitMEX co-founder Arthur Hayes, as the Federal Reserve seeks to fight inflation and the amount of support it injects into the economy dwindles, the cryptocurrency market cap is likely to shrink. He is buying crypto put options, predicting that the crypto market will further collapse in June 2022, describing it as a "coming crypto bloodbath" in which Bitcoin will fall to $30,000 and Ethereum will fall to $2,500.

Hayes predicted when BTC price was below $5,000 that BTC would reach $10,000 in 2019. This turned out to be correct, with Bitcoin price rising to over $12,000 in 2019.

Last week, veteran trader Peter Brandt argued that the next bull market cycle might not begin until 2024.