The digital currencies began their week with a noticeable decline, having lost more than 4.5% of their value in just 24 hours, equivalent to hundreds of billions of dollars. Bitcoin led this decline, dropping by 3% to record about $112,600, which reflected on the performance of the cryptocurrency market in general and led to widespread selling pressures.
Analysts believe that part of this decline is due to profit-taking and weak buying momentum, but the most prominent factor lies in the global bond market. The yields on US two-year bonds have stabilized at low levels, which market experts view as a sensitive indicator that directly affects the movement of risky assets, chief among them digital currencies.
In recent years, bond yields have risen sharply following a period of expansive monetary policies during the COVID pandemic, which increased uncertainty in the markets. With the beginning of 2023, yields started to move sideways, allowing for a brief recovery in the cryptocurrency market. However, with yields remaining at critical levels, investors are watching to see if the downward trend will be confirmed further, which could change the trajectory of global markets and sharply affect digital currencies.
This scene coincided with a decline in enthusiasm regarding the recent Federal Reserve decision to cut interest rates. Jerome Powell, the Fed Chair, described the step as merely a means of "managing risks," emphasizing that there is no hasty intention for further cuts in the near future. These messages prompted investors to exercise caution, which directly reflected on the cryptocurrency market, which experienced a wave of liquidations worth $1.7 billion in just one day, involving over 403,000 traders.
The impacts were more severe on alternative currencies, with Ethereum dropping over 7% to reach $4,190, the lowest level in over a month. Ripple fell by 6% to $2.80, Solana by 7%, and Cardano by 9%, while meme coins like Dogecoin dropped by 11% and Trump coin by 9%.
Experts agree that the coming weeks will be crucial in determining the direction of the market, as investors closely monitor US bond movements, viewing them as a key indicator of risk appetite in the markets, and thus the future of digital currencies.
