Bitcoin (BTC) and Ethereum (ETH) are experiencing losses in the Asian trading session, with BTC at approximately $66,000 and ETH above $3,300. Traders are dealing with the increase in Treasury yields and altered expectations regarding potential interest rate cuts by the Federal Reserve.

The surge in the 10-year Treasury note yield to a two-week high of 4.40% has been driven by persistent inflation and strong manufacturing activity. Higher yields on secure assets like Treasuries often lead to a shift of capital away from riskier assets and non-interest-bearing investments such as gold and cryptocurrencies.

Semir Gabeljic, Director of Capital Formation at Pythagoras Investments, attributes the Bitcoin retreat to $65,000 to the revised macroeconomic outlook on interest rates and Treasury yields. Elevated interest rates typically decrease investor interest in risky assets.

Indicators from platforms like Polymarket and analysis from CME’s Fed Watch Tool indicate a delay in rate cuts until the fall. Data from Coinglass shows liquidations of over $245 million in long positions in the past 24 hours, with $60 million in BTC positions.

Jun-Young Heo, a Derivatives Trader at Presto, notes that crypto futures funding rates have returned to 1bps, with a 10% overnight decrease in global futures open interest, indicating the closure of leveraged long positions. The slowdown in Bitcoin ETF inflows, BTC and ETH dropping below their 20-day moving averages, and the decrease in trend-following traders may signal the end of the recent two-month rally.

The recent decline in Bitcoin and Ethereum illustrates the intricate relationship between cryptocurrencies and traditional financial markets. While the long-term direction of the crypto market is debatable, monitoring Treasury yields and their effect on Federal Reserve policy will be essential for traders and investors navigating the crypto landscape going forward.