The crypto market has stayed under pressure as capital steadily drains out of the space, and total market capitalization for digital assets now hovers near $2.17 trillion while valuations struggle to find a floor.
Fragile economic conditions and the prospect of fresh action from the Federal Reserve remain a key threat to the outlook, and either one could weigh further on price performance across the board.
Rate hike could be next
Crypto analyst Benjamin Cowen expects the U.S. 10-year Treasury yield to keep gaining strength and sees a high chance of it reclaiming the 5% mark in the near term.
A rising yield reflects instability in an economy, particularly around inflation, and Cowen’s prediction lands as the U.S. 30-year bond yield crossed 5.28% on the 31st of July, one of its highest levels since 2007.
The climb has been building for weeks, drawing investors toward lower-risk assets and steadily pulling capital away from bets like Bitcoin [$BTC]. Cowen noted lowering rates does not automatically translate into lower yields, and he pointed to 2024-2025 as his case study.
The Fed cut rates from 5.5% to 3.75% from 2024-2025 and yet the 30 year yield is higher today than when interest rates were 5.5%!
He ties the expected move to the Federal Open Market Committee cutting rates too early, and he expects the pressure on the long end to keep building. A yield holding above 5% would eventually force the Fed to raise rates and tighten the flow of capital into risk assets.
Impact of a rising yield
A rising yield carries a clear knock-on effect once the Fed lifts interest rates. A hike tends to restrict capital flow because borrowing grows more expensive, and it pushes investors toward stable assets over riskier bets.
Cryptocurrencies are broadly considered risk assets, so tighter conditions consistently leave less capital coming from the US side, which can feed a gradual slowdown across the market.
That rotation toward safety already surfaced on Friday, when U.S.-listed products recorded a sharp spike in outflows and a visible drop in capital as the 30-year yield pushed to fresh highs.
$BTC and Hyperliquid [HYPE] sat on the losing side, with $265.37 million and $1.83 million pulled from the two assets, while other funds, including Ethereum [ETH] and Ripple [XRP], saw thinner flows of $9.03 million and $7.69 million, respectively.
A steeper rate hike would raise the odds of the bear market stretching on even longer.
Capital flow in the market
Capital across the market has thinned over the past few weeks, and the drain feeds directly into current conditions.
Stablecoins have seen heavy redemptions, with total supply down from $321.82 billion on the 22nd of May and roughly $14.27 billion pulled from the market since.
Most of the remaining stablecoin balance now sits idle instead of flowing into crypto, a sign investors are holding back from fresh bets on digital assets.
Final Summary
- Cowen expects the U.S. 10-year Treasury yield to keep climbing and reclaim the 5% mark, a move he believes would eventually push the Fed toward raising rates.
- Higher yields are already steering money into safer assets, and the resulting pullback in capital leaves Bitcoin and the wider crypto market exposed to a longer slowdown.