Bitcoin Buckles to $27.4K as Crypto Rally Fizzles on Macro Jitters

Bitcoin (BTC) slid to around $27,400, giving up most of its gains from a short-lived rally above $28,000 at the start of the week as traders took profits as jitters in traditional financial markets weighed on cryptocurrency prices.

BTC sunk to as low as $27,275 during U.S. morning hours on Tuesday, down 3.5% over the past 24 hours, according to CoinDesk data. The CoinDesk Market Index (CMI), a broad-based weighted index of hundreds of tokens, fell 3.4%, indicating profit-taking across the board.

The decline happened as continued rising bond market yields took a toll on risk assets across the board. The 10-year U.S. Treasury rate surged 8 bps to 4.76%, a fresh 16-year high early Tuesday, helping to send the S&P 500 and the tech-heavy Nasdaq 100 lower 1.3% and 1.6%, respectively.

"The crypto hangover could be enduring as global rates continue to rise, despite recession signals," Mike McGlone, senior macro strategist at Bloomberg Intelligence, said Tuesday in an X (formerly Twitter) post. He noted in a report that the U.S. Federal Reserve is still on the path of tightening liquidity conditions, and a declining BTC price has typically preceded Fed pivots. "Bitcoin may need to fall first," he concluded.

Ether (ETH) dropped near 4% to $1,649, fully retracing its advance above the $1,700 level after a dismal first day trading of ETH futures exchange-traded funds in the U.S.

XRP, BNB Chain’s BNB and dogecoin (DOGE) slumped 2%-3% during the day. Tron network’s TRX was down 4% at one point during Asian morning hours, then stabilized at around 8.7 cents.

Rollbit’s RLB tokens jumped 8%, continuing a multi-day run amid increased token demand and platform revenues.

Crypto optimism fizzles

Crypto markets rose Monday on ETF optimism that some traders hoped would bring renewed interest and capital to an otherwise tepid environment. Some even pointed to the historic seasonality of price surges in the month of October, aiming for a repeat of the unexplained coincidence.

But such an outlook always has the chance of falling flat, some argue.

“October is also typically a good month for the cryptocurrency market. Indeed, it is dubbed “uptober” by market insiders,” shared Lucas Kiely, chief investment officer of Yield App, in a message to CoinDesk. “Only twice since 2013 has bitcoin closed at a loss in October, and hopefully, this year will see a continuation of that trend.”

However, it is likely a little too early to get excited by these current price movements. This is unlikely to be the beginning of a significant rally without any other catalysts to drive it,” Keily cautioned, adding that the ongoing Sam Bankman-Fried trial “could take things either way” based on possible new information about crypto markets.

Elsewhere, Bitfinex markets analysts said in a weekly note that long-term investors were continuing to add to their holdings – boosting demand.

“On-chain activity for Bitcoin has hit record highs in terms of new addresses, but what stands out is that this activity predominantly involves short-term holder supply,” the analysts said. “This allows the supply held by long-term holders to continue reaching new peaks as short-term holders sell.”

“Volatility might also soon make a comeback in crypto, potentially towards the upside,” they opined.

UPDATE (Oct. 3, 16:17 UTC time): Updates prices, adds data about equity market performance.