Bitcoin and Ethereum Crash Continues as 10-Year US Treasury Yield Surpasses June High

Bitcoin (BTC) and Ethereum’s native token Ether (ETH) started the week on a depressed note as investors braced for a flurry of rate hike decisions from central banks, including the US Federal Reserve. and the Bank of England.

Bitcoin price fails to contain $20,000

On September 19, BTC price failed to regain the $20,000 psychological support zone. BTC/USD slipped 6.5% to around $18,250, while ETH fell 4% to around $1,280.

Their dismal performance is part of a broader decline that began in mid-August, during which BTC and ETH wiped out a total of 28% and 37% of their market valuation, respectively.

BTC/USD and ETH/USD daily price chart. Source: Trading View

A 500 basis point rise in global rates in sight?

This week, the Fed and a number of its global counterparts will potentially tackle rising inflation by raising interest rates further.

Data compiled by Bloomberg suggests the US central bank, alongside Sweden’s Riksbank, Swiss National Bank, Norway’s Norges Bank, Bank of England and others, will raise lending rates by 500 basis points basis, i.e. 5%.

Central bank rate decisions in the week ending September 24. Source: Bloomberg

The riskiest assets in the market reacted negatively to these upcoming policy meetings.

Last week, MSCI’s flagship global equity index, ACWI, which combines stocks from developed and emerging markets, fell 4.25% to nearly $84. At its peak, the index was trading at $107.39 in November 2021. Interestingly, Bitcoin and Ethereum peaked in the same month at $69,000 and $4,950, respectively.

ACWI Weekly Price Chart. Source: Trading View

Therefore, this growing correlation with the prospect of global rate hikes could continue to drag BTC and ETH down despite their growth-oriented narratives.

Instead, investors can seek safety in low-volatility assets, including the US dollar and government bonds.

For example, the U.S. dollar index, a barometer to gauge the strength of the greenback, rose 0.5% to 110 on September 19 after its highest weekly close since 2002.

Similarly, six-month US Treasury bills yield 3.79% if held to maturity, providing investors with a safer investment alternative with guaranteed short-term returns. Similarly, the 10-year US Treasury yield surpassed its June high when Bitcoin fell to yearly lows.

US Treasury yields as of September 19. Source: Bloomberg

Other shorter-maturity and longer-maturity Treasury bills produce similar yields.

Bitcoin at $14,000-$15,000, Ethereum at $750 next?

A mix of on-chain and technical indicators point to an impending price crash in the Bitcoin and Ethereum markets.

First, the Bitcoin Spent release age bands (7-10 years), which track BTC spent and group them into categories based on their age, showed the movement of over 5,000 BTC on the 4 september. MACD_D, a user of on-chain analytics platform CryptoQuant, says this is generally bad news for Bitcoin price.

“If the holder, who held BTC in their seventh year, moves more than 5,000 BTC, there could be a strong downward trend in the future,” the verified user wrote, noting:

“This indicator has shown signal 7 in the past and has dropped 6 times except for 1 (07 Feb 21). The fact that the long-term holder has moved BTC means that there will be an unusual price movement at the moment. ‘coming.”

Bitcoin has passed exit age bands (7-10 years). Source: CryptoQuant

The user also pointed to a recent increase in Ether dominance to over 20%, noting that it usually hints at a bubble about to burst. Excerpts:

“When #BTC is simply cross-sectional, Ethereum’s excessive rise creates a bubble. In particular, if ETH dominance increases more than 20%, it provides a good time to go short.”

Related: Goldman Sachs’ Bearish Macro Outlook Puts Bitcoin at Risk of Crashing to $12,000

From a technical standpoint, Bitcoin has entered the breakout phase of its dominant “bearish flag” pattern, now eyeing an extended decline towards the flag’s profit target at around $14,500 in 2022.

BTC/USD daily price chart with bear flag breakdown setup. Source: Trading View

Meanwhile, Ether also broke out of a symmetrical triangle. As a result, the price of ETH could drop towards $750 if the bearish continuation pattern occurs, along with the weakening technicals for the ETH/BTC pair as well.

ETH/USD daily price chart with symmetrical triangle pattern. Source: Trading View

In other words, a 40% crash in ETH prices is on the table before the end of the year.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.