US Treasury Yields Weigh on Crypto Markets: Short-Term Put Options in Demand for BTC and ETH
The recent surge in US Treasury yields has cast a shadow over cryptocurrency markets, leading to a decline in Ether (ETH) prices and an increased demand for short-term put options for both Bitcoin (BTC) and ETH.
Yields Impact Crypto Markets
US Treasury yields are the interest rates that investors earn by lending money to the US government. As yields rise, investors tend to shift their funds towards bonds, which offer a more attractive return. This outflow of capital from the crypto market can put pressure on prices.
Ether Prices Retreat
ETH, the second-largest cryptocurrency by market capitalization, has been particularly affected by the rise in yields. ETH prices have fallen below $3,000, as the CoinDesk Indices Ethereum Trend Indicator flipped negative, signaling a bearish shift in momentum.
Increased Demand for Put Options
In response to the uncertain market conditions, investors are turning to short-term put options to protect their assets. Put options give the buyer the right, but not the obligation, to sell an asset at a predetermined price before a certain date. As a result, investors can use put options as a hedge against potential losses.
Risk-Off Sentiment
The increase in demand for put options reflects the risk-off sentiment in the crypto market. “Unexpected higher US treasury yields, a stronger dollar, and geopolitical risks in the Middle East weighed down on crypto markets,” said Jun-young Heo, a Derivatives Trader at Presto.
Liquidations Evenly Split
Despite the bearish sentiment, liquidations in the last 12 hours have been almost evenly split between bullish and bearish futures bets. This suggests that investors are cautious but not yet ready to completely turn bearish.
Macroeconomic Factors Dominate
According to Justin d’Anethan, head of business development at Keyrock, the macro side of things seems to be dominating all risk assets. “More hawkish rate expectations in light of surprisingly higher inflation and, of course, the increase in tension in the Middle East” are all contributing to the risk-off sentiment.
Outlook Remains Uncertain
The outlook for crypto markets remains uncertain, as investors await further developments in the macroeconomic environment. “It might need some time or other catalyst rather than known events to turn this sentiment back to bullish,” added Heo.
Mehek