Bitcoin ( BTC ) has gained some stability since last Thursday. However, the cryptocurrency is still on course for its first loss in a month since December.

At press time, the leading cryptocurrency in terms of market value was trading near $27800, an increase of 7.5% from its lows below $25,900 last week. Prices were down about 5% on a monthly basis, which is the first decline in the year. (If this loss continues through Wednesday’s close UTC). Bitcoin had a good performance in March, April and January. However, it ended February with a flat price.

CoinDesk data show that bitcoin was expected to decline by nearly 7% against ether (ETH) in a given month.

Bond traders have re-instated their bets on the Federal Reserve’s (Fed’s) intention to keep interest rates high for longer due to inflation that is stubborn and a strong labor market. Interest rate traders had previously predicted that the Fed funds rate (the benchmark borrowing cost) would fall from 5% to 4.5% by 2023. The market does not expect the Fed to cut rates this year.

This month, the renewed hawkish Fed betting has given the U.S. Dollar a boost, raising the greenback 2.7% against a basket fiat currencies including the euro. Bitcoin moves in the opposite direction to the dollar.

Since early last year, capital has been leaving crypto markets. This trend has continued this month. The stablecoin market cap is now at a 20-month minimum of $130 billion. Stablecoins, which are digital assets whose values are pegged to a reference such as the U.S. Dollar, have been used extensively to fund the purchase of other cryptocurrencies in the last three years.

Markus Thielen is the head of research and strategic planning at Matrixport. He said: “We can assume the liquidity wave has run its course, and that the market now needs a new theme and driver to raise prices.” The tech sector is often correlated with BTC. However, the AI and Chat GPT Revolution has given the former new life, but BTC still does not benefit from it yet.

Bitcoin decoupled with Wall Street’s technology heavy index Nasdaq which has gained nearly 8% in the last month.

Griffin Ardern is a volatility trader at crypto asset management company Blofin. He said that the high interest rate environment will continue to work against bitcoin bulls.

Ardern stated that “in a high interest rate environment, investors are more attracted to high returns with low risk, such as money-market funds, which is why the lack of liquidity in the crypto market persists.”

Dick Lo, founder and CEO at quant-driven crypto trading company TDX said that bitcoin’s 4% increase on Sunday was a relief rallies triggered by U.S. Leaders announcing a deal to raise the $31.4 trillion in debt limit reached in January. Further gains may be difficult to come by.

The rebound that we saw Sunday night/Monday morning was a relief rally triggered by the U.S. Debt Ceiling Package. The market is likely to focus on the possibility of a 25 basis point interest rate increase at the June FOMC Meeting and the potential liquidation drain, as Treasury must sell at least 500 billion dollars in bills to replenish its cash position in the short term. This will weigh down risk assets,” Lo explained.

Lo said, “We see strong resistance at BTC of $28,500, with initial support at $27350. A potential retest at $26,200 could follow.”

Parikshit Miishra is the editor.