Bitcoin slipped below $70,000 on Tuesday as traders priced in potential Federal Reserve rate hikes. Market participants are weighing the impact of higher borrowing costs on risk assets. The move follows a broader pullback in technology sectors and equity markets.
Circle, the issuer of the USDC stablecoin, led equity declines with a sharp 16% drop in share value. Coinbase Global Inc also suffered losses, falling eight % during the same trading session. These declines occurred after shares for both companies rallied significantly over the previous month.
A draft version of the U.S. Clarity Act reportedly restricts rewards on passive stablecoin balances. This legislative update threatens to limit yields on stablecoin holdings, which investors viewed as a key driver. Shay Boloor, chief market strategist at Futurum Equities, commented on the restriction in an X post.
Boloor stated that the legislation weakens the bull case by making USDC harder to evolve into a store-of-value product. Such regulatory hurdles often complicate the transition from payment utilities to broader financial instruments. Competitors are taking steps to bolster investor confidence in their reserve assets.
Tether, the issuer of USDT, announced it hired a Big Four accounting firm for a complete audit of its reserves. This move aims to improve trust in USDT holdings following recent market volatility. Industry observers view this as a strategic countermeasure to the regulatory headwinds facing Circle.
Expectations for Federal Reserve policy have shifted dramatically from rate cuts to potential rate hikes in recent weeks. According to CME FedWatch data, there is now zero chance of a rate cut at the upcoming April or June meetings. Analysts see a 15% probability of a rate increase at one of those sessions.
Global yields continue to climb while the U.S. dollar index remains firm above 99. Oil prices rose two % over the past 24 hours, reinforcing the broader risk-off tone. The S&P 500 and Nasdaq indexes gave up much of their Monday gains on news regarding tensions.
Bitcoin appears to be continuing a familiar three-month trend of modest gains followed by small declines. Velo data indicates the asset typically rises just over one % on Mondays before falling slightly under one % on Tuesdays. This pattern suggests investors are currently cautious about sustained upward momentum.
The software stock sector also rolled over, with the iShares Expanded Tech-Software Sector ETF dropping four %. Crypto prices have moved closely in line with this sector in recent months. That correlation was on full display again as digital assets weakened alongside technology.
What comes next depends on how the Federal Reserve navigates the nomination of Kevin Warsh for central bank leadership. President Trump has nominated Warsh to replace Jerome Powell with the intention of lowering borrowing costs. Investors will monitor whether this political dynamic alters the trajectory of interest rate expectations.
