Bitcoin drops below $97,000 as Treasury yields pressure risk assets

Bitcoin slumped on Tuesday as a spike in Treasury yields weighed on risk assets broadly.

The price of the flagship cryptocurrency was last lower by 5% at $96,525.50, according to Coin Metrics. Ether slid 8% and the broader market of cryptocurrencies, as measured by the CoinDesk 20 index, dropped 7%.

Crypto stocks Coinbase and MicroStrategy fell more than 8% and 9%, respectively. Bitcoin miners Mara Holdings and Core Scientific were down about 7% and 6%, respectively.

The moves followed a sudden increase in the 10-year U.S. Treasury yield after data released by the Institute for Supply Management reflected faster-than-expected growth in the U.S. services sector in December, adding to concerns about stickier inflation. Rising yields tend to pressure growth oriented risk assets.

Bitcoin traded above $102,000 on Monday and is widely expected to about double this year from that level. Investors are hopeful that clearer regulation will support digital asset prices and in turn benefit stocks like Coinbase and Robinhood.

However, uncertainty about the path of Federal Reserve interest rate cuts could put bumps in the road for crypto prices. In December, the central bank signaled that although it was cutting rates a third time, it may do fewer rate cuts in 2025 than investors had anticipated. Historically, rate cuts have had a positive effect on bitcoin price while hikes have had a negative impact.

Bitcoin is up more than 3% since the start of the year. It posted a 120% gain for 2024.