Bitcoin Drops Below $85,000 as Treasury Yields Reclaim 5%

Bitcoin slid below $85,000 on Sept. 23 as a stronger-than-expected snapshot of U.S. business activity pushed Treasury yields higher and triggered a wave of liquidations in leveraged long positions. The pullback interrupted a rebound that had gathered pace earlier in the week after Bitcoin broke through a heavy pocket of short positioning. Selling pressure ramped up after S&P Global published its September flash purchasing managers' indexes. CoinGlass data showed $135.8 million in crypto positions were liquidated within an hour, including $125.9 million in longs. Bitcoin made up $47.4 million of the liquidations, with Ether at $23.9 million. Over the past 24 hours, liquidations totaled $510 million across 122,256 traders, with long-side losses at $363.83 million. The move underscored how quickly the rates backdrop shifted against a market positioned for more upside. New data pointed to faster U.S. growth alongside renewed cost pressures, reinforcing the case for interest rates to stay higher for longer. S&P Global's composite PMI rose to 58.4 in September, the strongest reading in more than five years. The services index increased to 58.7, while manufacturing climbed to 57. All three prints beat expectations. Chris Williamson, chief business economist at S&P Global Market Intelligence, said historical comparisons suggest the survey aligns with roughly 5% annualized growth, with around 4% implied for the overall third quarter. The growth signal came with a less favorable inflation profile. Firms reported the sharpest increase in input costs in four years as higher oil prices lifted fuel and transportation expenses. Businesses also flagged worsening supply-chain bottlenecks and rising backlogs. Williamson said stronger demand amid capacity constraints is boosting companies' pricing power, increasing the risk that higher costs feed through to inflation in coming months. He added: "This growth is being accompanied by some of the most severe supply chain bottlenecks seen in the near-two-decade survey history if the pandemic is excluded, with companies also reporting increasing problems finding suitable staff. Backlogs of work are consequently rising sharply. While this accumulation of uncompleted orders bodes well for the further expansion of output and capacity in the coming months, it also indicates that companies are developing more pricing power, and hence is a worry for the inflation outlook". Bond markets reacted swiftly. The 10-year Treasury yield moved back above 5%, around levels last seen in 2007, while the two-year yield climbed to its highest level in about 27 months. The rise also revived concerns over how much additional yield investors may demand as U.S. government borrowing expands. James Lavish, co-managing partner of Bitcoin Opportunity Fund, said growing Treasury supply is colliding with investor anxiety over what he characterized as structural dollar debasement. He argued that higher yields can become self-reinforcing as increased interest expense lifts financing needs and drives further debt issuance. Lavish said any eventual monetary intervention to absorb that supply could intensify currency concerns, creating what he described as a "self-reinforcing loop." The structural debate adds to the immediate implication of the PMI report: stronger-than-expected growth gives the Federal Reserve more scope to keep policy restrictive, while higher input costs and rising oil prices complicate the inflation outlook. For Bitcoin, the timing is awkward. Much of the bearish positioning that helped fuel the latest rally had already been flushed. The move through $86,000 earlier in the week forced short covering and helped push Bitcoin toward $87,000. Wednesday's reversal removed that support just as bond-market conditions turned less friendly for risk assets. With Treasury yields above 5% and U.S. data still surprising to the upside, Bitcoin increasingly relies on fresh spot demand to recapture $85,000, without the same short-covering boost that helped drive the earlier advance.