Bitcoin hit a fresh record of $109,857 earlier on Wednesday before getting wrecked hours later, dropping almost instantly to $106,678 and wiping out most of the day’s gains. The drop came as Treasury yields ripped higher, sending stocks lower across the board.
Bitcoin’s price had risen nearly 3% earlier in the day, only to reverse as bond traders responded to signs of bigger government spending in the US.
The cryptocurrency has been climbing all month, now up 13% in May alone. After drifting below $75,000 in April, it finally broke out this week thanks to what traders are calling a “perfect mix” of macro changes.
Antoni Trenchev, the co-founder of crypto exchange Nexo, said that “Bitcoin’s new high has been concocted by an array of favorable ingredients in the macro cauldron, namely softer US inflation numbers, a de-escalation in the US-China trade war and the Moody’s downgrade of US sovereign debt, which has put the spotlight on alternative stores of value like bitcoin.”
But that mix went sour fast. As bond yields spiked, it flipped risk sentiment across markets, sending Bitcoin and stocks into the red. Antoni added:
“We’ve entered an alternate universe very different from early April when global macro concerns were at their peak and bitcoin slumped to $74,000. It’s possible a three-month window has opened for risk assets to thrive as a broader agreement between the US and China is thrashed out.”
Yields jump, stocks sink, and crypto takes a hit
The sudden selloff came after investors reacted to new signs that the US budget bill is headed toward passage. As negotiations moved forward, traders saw no signs of fiscal discipline. The 30-year Treasury bond yield surged to 5.08%, its highest level since October 2023, while the 10-year yield jumped to 4.59%.
Stocks didn’t escape the storm. The Dow Jones Industrial Average shed 732 points, down 1.7%, while the S&P 500 and Nasdaq Composite lost 1.3% and 1.1%, respectively. That pressure spilled into crypto, sending Bitcoin lower and shaking confidence in the rally.
Sam Stovall, chief investment strategist at CFRA Research, said the fiscal outlook is what’s really moving yields. “The question now is, from a fiscal perspective, what will the tax bill look like, and will it undo all of the recent fiscal frugality by simply raising the debt level at a slower rate of pace? So I think that’s why the 10-year yield is moving higher — because investors are worried that we’re really not doing anything to slow the pace of inflation and to reduce the debt,” he told CNBC.
He added, “Now it seems as if there is a greater chance that the tax bill will pass, and that could end up simply continuing to raise the overall debt level.”
ETF inflows, stablecoin regulation, and corporate buying keep pressure balanced
While the day is ending in the red, the bigger picture isn’t entirely bearish. Traders have been pouring money into Bitcoin ETFs, which have now pulled in over $40 billion, with only two days of outflows this month, according to SoSoValue.
The flows show that demand for exposure is still strong, even if the price is shaky in the short term. On-chain signals also point to strength. Data from CryptoQuant shows a drop in selling pressure, with fewer coins moving onto exchanges.
At the same time, a record amount of Tether (USDT) is sitting on trading platforms, signaling that buyers are waiting for the right moment to move. This level of liquidity hasn’t been seen in months.
Corporate treasuries are still accumulating. Since January, companies holding Bitcoin have raised their holdings by 31%, now sitting on a combined total of around $349 billion, which is roughly 15% of the entire Bitcoin supply, based on figures from Bitcoin Treasuries.
On the regulation side, Congress is finally taking action. The Senate voted this week to advance legislation that would build a national framework for stablecoins, an area that has been left wide open for years.
President Donald Trump has said he wants to sign off on crypto regulation by August, just before the Congressional recess.
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