After falling below $60,000, Bitcoin fell another 5%. There are three main reasons behind this

On March 21, the price of Bitcoin dropped below $56,000 and for the past four days, Bitcoin has been rejected by the $60,000 resistance level.

BTC/USD 1-hour candlestick chart. Source: Tradingview

Although Bitcoin is getting closer to breaking through key technical levels, it has been trading weakly in the $59,000 to $60,500 range.

There are three main reasons behind this stagnation: rising U.S. Treasury yields, bearish trends on Bitfinex, and a struggling risk-on market.

High U.S. Treasury yields send risk appetite tumbling

When the 10-year Treasury yield rises, investor appetite for risky assets tends to decline as investors can look for safer yield alternatives in U.S. Treasuries.

While Bitcoin is not tightly correlated with the Dow, it is closely correlated with tech-heavy indices like the S&P 500.

As Cointelegraph previously reported, this showed that strong momentum in U.S. Treasuries caused risk assets to stagnate, followed by a downward trend for Bitcoin.

U.S. Treasury yields began to break through key levels on March 19. Since then, Bitcoin has been consolidating and has had a hard time breaking through $60,000.

Holger Zschaepitz, market analyst at Welt, said:

U.S. Treasury yields broke through key levels as bond traders increased bets that the Federal Reserve will allow inflation to exceed its target as the U.S. economy recovers. The 10-year Treasury yield has broken through 1.75% but has encountered no "real barriers" to rising.

10-year US Treasury yield rises above 1.7% Source: Bloomberg, Holger Zschaepitz

For Bitcoin to achieve a sustained rally, it will need to see a favorable macro environment, which is only possible through stabilizing U.S. Treasury yields.

Bitfinex faces selling pressure at $60,000 resistance

Anonymous Bitcoin trader and technical analyst “Byzantine General” said Bitfinex is facing huge selling pressure.

The trader said other derivatives trading platforms such as Deribit, FTX and BitMEX have also seen a large number of shorts.

He wrote:

“Yeah… the decline is not over yet. There is still selling pressure on Bitfinex. There is a lot of shorts on Deribit, Mex and FTX. But open interest is finally starting to unwind.”

Short Bitcoin Price Source: TradingView.com, Byzantine General

Unfavorable macro conditions coupled with selling pressure from whales and derivatives traders could cause Bitcoin to consolidate below $60,000.

However, if open interest in the futures market continues to unwind in the foreseeable future, the likelihood of a rebound could increase.

Open interest is the total number of active positions in the futures market. When this number falls, it means that there is a general decrease in trading activity in derivatives.

There is a positive incentive

Well-known on-chain analyst Willy Woo explained that there is a high probability that Bitcoin’s market capitalization will not fall below $1 trillion again.

Woo pointed out that the UTXO Realized Price Distribution (URPD) metric, which shows the realized price of all UTXOs on any given day, suggests that a market cap of $1 trillion is a price floor. He said:

“URPD: 7.3% of Bitcoin has moved recently when market cap was over $1 trillion. This is very solid price validation; $1 trillion has strong investor support. I would say there is a good chance we will never see Bitcoin market cap below $1 trillion again. It’s only been 3 months since Bitcoin broke out of the previous macro cycle’s all-time peak of $19,700. Already 28.7% of Bitcoin has moved when the price was over $19,700.”

UTXO Realized Price Distribution Source: GlassNode

On-chain data also suggests that while there is short-term selling pressure on Bitcoin, it is not significant enough to suggest that the market is anticipating a long-term correction.

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