At the start of the week, the crypto market entered a correction, interrupting a two-week rally. Risk assets came under pressure from two macroeconomic factors at once: a sharp spike in U.S. Treasury yields and an escalation of tensions in the Middle East.
At one point, the price of Bitcoin fell by 1.7%, dropping to $83,061. Prior to this, BTC had been rising steadily for two weeks, living up to positive expectations from U.S. regulators, but external headwinds prompted traders to start taking profits.
Bond Yields at Record Highs: Why Capital Is Flowing Out of Cryptocurrency
The main trigger for the correction was the global rise in sovereign debt yields. Investors are pricing in a scenario in which central banks will continue to tighten monetary policy to combat stubborn inflation.
The yield on 10-year U.S. Treasury bonds crossed the psychological 5% threshold, returning to 2007 levels. Meanwhile, yields in Japan hit 30-year highs.
Following the September rate decisions by the Fed and the Bank of Japan, as well as signals that they are prepared to take further action, conservative investments have become much more attractive. For speculative assets that do not provide a guaranteed return, such as cryptocurrencies, tight monetary policy typically means an outflow of liquidity in favor of risk-free government debt.
The Iran Factor and the Oil Stalemate
The conflict in the Middle East remains a second source of inflationary pressure. The situation surrounding the Strait of Hormuz has reached an impasse, and energy prices remain high, fueling inflation.
Donald Trump has rejected Tehran’s peace initiatives and, in a recent interview, did not rule out the possibility of new military action against Iran. Although negotiations are technically ongoing, the parties have yet to reach an agreement. Tensions are further heightened by Houthi attacks in the Red Sea region and Saudi Arabia, keeping oil prices high.
Altcoins Are Also Under Pressure
Amid Bitcoin’s pullback, the entire market turned red. Investors began actively closing out positions after two weeks of gains:
Ethereum (ETH) lost 2% and dropped to $2,652;
XRP fell 2.7%;
Solana (SOL) dropped 2.1%;
Cardano (ADA) fell 3.5%;
BNB corrected by 1.3%.
In the meme coin segment, the sell-off was even more pronounced: Dogecoin (DOGE) lost 3.8%, and the $TRUMP token fell by 4.4%. It appears the market has paused to wait and see how the macroeconomic and geopolitical situation plays out.