On Monday, major cryptocurrencies experienced moderate losses as the US dollar index climbed alongside Treasury yields, indicating the market's increasing acceptance of the Federal Reserve's ongoing liquidity tightening cycle. CoinDesk's Bitcoin (BTC) price index dipped below $30,000, reflecting a 1.7% decline over the past 24 hours. Ethereum's native token, Ether (ETH), which experienced a successful Shapella hard fork last week, decreased by nearly 1.8% to $2,084.
The DeFi dominance index, which evaluates the market cap of a selection of leading decentralized finance (DeFi) coins as a percentage of the overall market, remained stable at around 4.3%, as reported by data provider TradingView. On Friday, the US Securities and Exchange Commission (SEC) revived a proposal from last year explicitly targeting DeFi.
In traditional markets, the dollar index, which measures the greenback's value against major currencies, rose to 101.80, building on Friday's 0.5% increase from 101.00. The yield on the two-year note rose nearly five basis points to 4.16%, extending the previous week's 15 basis points increase. The 10-year note yield reached a one-month high of 3.54%. Bond yields began to climb on Friday after Fed Governor Christopher Waller stated that the central bank had not significantly reduced inflation to its 2% target and needed to raise interest rates further.
According to the CME's FedWatch tool, traders estimated an 85% chance that the Fed would increase rates by 25 basis points to a new range of 5% to 5.25%, up from 66% after Wednesday's inflation data release. In the past 12 months, the central bank has raised rates by 475 basis points, leading to volatility in risk assets, including cryptocurrencies.
Markus Thielen, Head of Research and Strategy at crypto services provider Matrixport, remarked in a daily market update, "The 10-year Treasury yield is quietly climbing back up. This needs monitoring in terms of a warning sign." Thielen also suggested considering profit-taking, as the crypto market displays exuberant signs, and replacing the delta with upside call spreads if prices continue to rally.
Alex Kuptsikevich, Senior Market Analyst at FxPro, noted that Bitcoin might struggle to maintain a foothold above the $30,000 former support-turned-resistance level in the short term. He added, "Traders should be prepared that the $30,000 mark for the first cryptocurrency could act as solid resistance after it was rigid support in 2021."
