What caused Bitcoin to fall back to $66,000?

• Bitcoin hovers around $66,000, with the CoinDesk 20 index signaling broader market weakness.

• Cryptocurrency futures rates and open interest fell, signaling a possible end to a two-month rally.

Bitcoin (BTC) continued to fall during Tuesday’s Asian trading session, trading around $66,000 as traders digested a rebound in U.S. Treasury yields and the possibility that the Federal Reserve may delay rate cuts until later in the year.

As of writing, Ethereum (ETH) is changing hands for over $3,300, while the CoinDesk 20 (CD20) is down 0.6% at $2,532.

Overnight, the 10-year Treasury yield hit a two-week high of 4.40% amid persistent inflation and unexpectedly strong manufacturing activity. A rise in so-called risk-free rates typically spurs outflows from risky assets and zero-yielding investments like gold. However, the yellow metal has remained resilient amid weakness in Bitcoin and Wall Street’s tech-heavy Nasdaq.

“Bitcoin’s pullback to $65,000 can be largely attributed to the near-term macro outlook for interest rates and rising Treasury yields,” Semir Gabeljic, director of capital formation at Pythagoras Investments, said in an email interview. “A higher interest rate environment generally reduces risk appetite among investors.”

On Polymarket, punters have ruled out a rate cut in May and are evenly split on whether there will be a cut in June. Most bets are on the autumn.

(Polymarket)

The CME FedWatch tool shows a 97% chance of keeping interest rates unchanged after the May meeting.

Coinglass data shows that more than $245 million in long positions have been liquidated in the past 24 hours, including $60 million in BTC positions.

Jun-Young Heo, a derivatives trader at Presto in Singapore, added: “Perpetual futures funding rates for most crypto assets are back to 1 basis point, and global futures open interest fell 10% overnight, indicating some leveraged long positions were unwound.”

“With recent Bitcoin ETF inflows stagnating and BTC and ETH market prices trading below their 20-day moving averages, some trend followers may view yesterday’s downturn as the end of a two-month-long rally,” he continued.