U.S. Treasury yields soared to multi-year highs, Bitcoin fell 2%, and Dogecoin rose 17% against the trend

Bitcoin traded in a range on Tuesday after Federal Reserve Governor Lael Brainard said the central bank could quickly reduce the size of its balance sheet.

“The (Federal Open Market Committee) will continue to methodically tighten monetary policy through a series of rate hikes and begin a rapid reduction in the balance sheet as soon as our May meeting,” Brainard said.

BTC fell 3% after Brainard's statement, but stabilized later in the day. Bitpush terminal data showed that as of press time, the price of Bitcoin was $45,290, down 2.66% in the past 24 hours. However, Dogecoin rose 17% in the past 24 hours. Meanwhile, SHIB rose 4% on Tuesday, while WAVES fell 13% during the same period.

More aggressive tightening by central banks has unnerved markets as investors reduce their exposure to speculative assets. Stocks fell, while the 10-year Treasury yield surged to its highest level since May 2019.

According to Arcane Research, the average Bitcoin funding rate on Binance and Bybit, or the cost of holding a long position in perpetual futures listed on major exchanges, has remained below positive for the 122nd consecutive day.

“However, since BTC breached $45,000 last week, funding rates have normalized around neutral territory, suggesting that demand for long and short positions is currently balanced,” Arcan wrote in a report on Tuesday.

For Ethereum, FundStrat noted that the funding rate has been positive for 10 consecutive days. This shows that traders are more bullish on ETH than BTC.

Additionally, according to Glassnode, blockchain data shows that short-term Bitcoin holders have been accumulating positions since Bitcoin’s recent price low on January 22.

Despite this, the supply of BTC held in long-term holders (whales) addresses has stabilized. “This generally indicates that this wallet group is contributing the least to the current accumulation trend,” Glassnode wrote in a blog post.

Blockchain analytics firm Glassnode said the Reserve Risk indicator is low when there is a large investor accumulation and HODLing is the preferred market strategy. The indicator measures the risk-reward ratio assigned to Bitcoin based on the conviction of long-term holders. At press time, the Reserve Risk is 0.0024.

In other words, a low reading indicates that conviction is high among HODLers and they are refusing to spend their coins. Therefore, it is an attractive risk/reward for potential buyers to get involved in the market.

However, in the past, Reserve Risk has long lingered in the green zone, marking a slow transition from the final stages of a bear market to the middle stages of a bull market. Therefore, investors who want to increase their Bitcoin exposure and track low Reserve Risk need to be patient or have the ability to tolerate long periods of underperformance before being rewarded handsomely.