Price trends across the cryptocurrency market remained in a downtrend today with rising U.S. bond yields likely the culprit.

Crypto market cap drops to lowest in two months

On Aug. 17, the crypto market’s capitalization sank 1.3% to $1.097 trillion, its lowest level in two months. Meanwhile, Bitcoin (BTC), which comprises 50% of the total crypto market, fell 1.4%, while Ether (ETH) lost 1.6%.

Crypto market cap vs. BTC/USD and ETH/USD daily performance chart. Source: TradingView

The crypto market has been in a slump since mid-July, coinciding with the U.S. dollar index’s (DXY) gains in the same period.

Furthermore, its decline coincides with soaring U.S. bond yields. On Aug. 17, the benchmark U.S. 10-year Treasury note yield climbed to 4.31%, the highest since October 2022. This suggests investors are moving toward safer assets over non-yielding cryptocurrencies like Bitcoin.

U.S. 10-year Treasury note yield vs. BTC/USD daily performance chart. Source: TradingView

The yields jumped a day after the Federal Open Market Committee’s (FOMC) minutes from July meeting reiterated hawkishness. Notably, most Fed officials believe inflation might stay elevated without further interest rate hikes, raising expectations of another rate hike in September.

Expectations of higher rates have been historically bearish for the crypto market, which likely explains the crypto market’s drop on Aug. 17.

However, the implied Fed funds futures rates predict the first-rate cuts in around May-June 2024, according to the data below. Nonetheless, the Fed rates are expected to remain inside the current 5.25-5.50% range until then.

Fed funds futures rate. Source: Refinitiv

A sharp rebound ahead?

The crypto market capitalization is now nearly oversold with its daily relative strength index (RSI) at 33.75, just around four points above the typical threshold. In other words, the market has a good chance of stabilizing or rebounding in the coming days.

Crypto market capitalization daily performance chart. Source: TradingView

Moreover, the market is testing its 200-day exponential moving average (200-day EMA; the blue wave) near $1.098 trillion as support. This is a good place for a bounce toward $1.166 trillion if the support holds, up over 3% from current levels.

Related: Bitcoin speculators now own the least BTC since $69K all-time highs

On the flip side, the bears will try to drag the market below ascending trendline support around $1.053 trillion, down about 4% from current levels.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.