What Are the Factors Putting the Bitcoin Price Under Pressure Again?

• Bitcoin price, which had a strong start to October, reaching above $28,000, has experienced a significant pullback, falling by 1.87% and trading around $27,610 at the time of writing.
• U.S. Treasury bond yields nearing levels not seen since 2007 reflect growing expectations that the Federal Reserve will raise interest rates for an extended period to combat inflation.
• Historically, the fourth quarter has been positive for both Bitcoin and the overall cryptocurrency markets. Bitcoin has gained 67% this year and recovered a portion of the significant losses in 2022.

At the beginning of October, Bitcoin bulls gained significant dominance, but this was short-lived. Why is the Bitcoin price being suppressed?

Bitcoin Had a Good Start to October but It Was Short-Lived

Bitcoin (BTC) price started October strongly, surpassing $28,000, but it has since experienced a significant pullback, falling by 1.87% and trading around $27,610 at the time of writing. The recent price drop is a result of rising bond yields reducing demand for risky investments.

On Monday, Bitcoin surged above $28,500 with increased optimism about wider cryptocurrency adoption following the launch of U.S. exchange-traded funds (ETFs) based on Ether futures contracts. However, these products did not generate as much interest as Bitcoin bears in 2021. Speaking about the development, Cici Lu McCalman, founder of blockchain consultancy Venn Link Partners, stated:

“The price increase was short-lived because the macro environment still presents a tight stance on interest rates. The increase in U.S. Treasury yields put pressure on Bitcoin.”

U.S. Treasury bond yields nearing levels not seen since 2007 reflect growing expectations that the Federal Reserve will raise interest rates for an extended period to combat inflation. These tighter financial conditions pose challenges for assets like stocks and cryptocurrencies.

According to Cleveland Fed President Loretta Mester, there is a possibility of the Fed raising the federal funds rate once more this year. She emphasizes that policy decisions will be influenced by real progress toward the Federal Reserve’s dual mandate goals, including assessing whether the substantial progress in inflation observed over the past three months continues and whether labor market conditions continue to improve moderately.

Will the Fourth Quarter Be Good for Bitcoin This Time?

Historically, the fourth quarter has been positive for both Bitcoin and the overall cryptocurrency markets. Bitcoin has gained 67% this year and recovered a portion of the significant losses in 2022. However, it is still far from the all-time high of $69,000 seen during the pandemic.

Analysts find comfort in Bitcoin’s historical seasonal tendencies as October has historically been a strong month for cryptocurrencies. According to data compiled by Bloomberg, over the past ten years, Bitcoin has averaged a 24% increase in October.

According to Kaiko, Bitcoin’s dominance in the U.S. crypto trading arena is increasing, representing 71% of trading volume on American exchanges in September. This surpasses the 66% rate recorded during the banking turmoil in March.

One of the reasons for this shift could be, as suggested by Kaiko, that institutional traders might turn to Bitcoin due to rising real yields and worsening global risk sentiment.

On Monday, Bitcoin made a strong move above $28,000, raising hopes for a rally to $31,000. However, today’s drop below $27,900 indicates that bulls are not completely in control.