Elevated Treasury yields are weighing on bitcoin. Here's a case for it dropping to $90,000.
By Frances YueBitcoin is on pace to record its third straight day of declines as macroeconomic headwinds weigh on the crypto after it hit a record high near $110,000 last monthBitcoin has been struggling below the $100,000 milestone for the past few days, as higher bond yields weighed on the cryptocurrency after it hit a record high near $110,000 last month.The largest cryptocurrency by market capitalization (BTCUSD) has fallen 4.7% over the past five days but was up 2% on Friday to around $93,712, according to the Dow Jones Market Data. It was roughly 13.5% away from its record high at $108,309, reached on Dec. 17.From the technical perspective, if bitcoin breaks below the support level of $92,000, it may fall toward $90,000 next, analysts at QCP Capital wrote in a Thursday note.The recent rise in U.S. Treasury yields has pressured risk assets across the board, including crypto, according to Peter Chung, head of research at algorithm trading firm Presto.The yield on the 10-year Treasury note BX:TMUBMUSD10Y spiked to as high as 4.793% Friday morning, the loftiest level since November 2023, before pulling back slightly to around 4.762%.Read: Stocks appear 'rate sensitive once again' as bond yields press higherThe recent rise of benchmark Treasury yields isn't positive news for risk assets, "because it implies that maybe the market has gone a little bit too far in expecting a liquidity-driven bull market in 2025," Chung said in a phone interview."Maybe the market needs to recalibrate to embrace less liquidity being injected into the market, and I think that translates into consolidation across the board for many of the risk assets," Chung said.The S&P 500 SPX was down 2.8% from a month ago, though it was still up 0.6% in January.While some bitcoin bulls have argued that the crypto could eventually serve as a store of value, it has mostly been trading as a risky asset, often in tandem with stocks.Also weighing on crypto, the minutes of the Federal Reserve's December meeting released on Wednesday said that "participants indicated that the committee was at or near the point at which it would be appropriate to slow the pace of policy easing." The minutes showed that almost all Fed officials on the rate-setting committee thought that upside risks to inflation had increased.Meanwhile, the jobs report released Friday showed that the U.S. added a greater-than-expected 256,000 new jobs in December, although most of the increase was concentrated in a handful of industries.Fed-funds futures traders were pricing in a 38.3% likelihood that the Fed won't deliver any rate cuts in the first half of this year, according to the CME FedWatch tool. That was up from 12.4% a month ago.Fear that the U.S. government may sell more of the bitcoin it seized in recent years from illicit activities also has been weighing on the cryptocurrency. The U.S. government has been periodically conducting sales of seized crypto, which could put downward pressure on the crypto.Chief U.S. District Court Judge Richard Seeborg of the Northern District of California last week denied a motion to block the forfeiture of 69,370 bitcoins, clearing the way for the Justice Department to potentially sell such assets, according to a Dec. 30 court filing.Crypto bulls have hoped that the U.S. government will stop selling the bitcoins it holds after President-elect Donald Trump returns to the Oval Office on Jan. 20. Trump has vowed to build a strategic bitcoin reserve in the U.S., without detailing specific plans. "If I am elected, it will be the policy of the United States of America to keep 100% of the bitcoins the U.S. government currently holds or acquires in the future," he said in July.Also read: Here are the Treasury yield 'trigger' levels that could hurt the bull market-Frances YueThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.