The latest data from prediction markets has sent ripples through financial ecosystems, as reported by The Kobeissi Letter on May 28, 2025. According to Kalshi, a leading prediction market platform, expectations for interest rate cuts in 2025 have drastically declined to a median of just 1.9 cuts, a sharp drop from the high of 4 cuts projected in April 2025. This shift signals a return to a 'higher for longer' interest rate narrative, with Treasury yields climbing in response. At the time of the report on May 28 at approximately 10:00 AM EDT, the 10-year Treasury yield rose to 4.62%, up 0.05% from the previous day’s close, reflecting market adjustments to tighter monetary policy expectations. This development has profound implications for risk assets, including cryptocurrencies, as higher yields often divert capital from speculative investments like Bitcoin and altcoins to safer fixed-income securities. The crypto market, already sensitive to macroeconomic shifts, saw Bitcoin (BTC) dip by 1.2% to $67,800 within hours of the news release at around 11:00 AM EDT on May 28, 2025, as tracked on CoinMarketCap. Ethereum (ETH) mirrored this movement, declining 1.5% to $3,820 during the same timeframe, indicating immediate risk-off sentiment among traders. Trading volume for BTC/USD spiked by 8% on major exchanges like Binance during the 11:00 AM to 12:00 PM EDT window, suggesting heightened selling pressure in response to the yield surge and revised rate cut expectations.

From a trading perspective, the reduced expectation of rate cuts in 2025 presents both challenges and opportunities for crypto investors. Higher interest rates typically strengthen the U.S. dollar, which often exerts downward pressure on Bitcoin and other cryptocurrencies, as seen in the immediate price drops on May 28, 2025. However, this environment could favor specific crypto sectors, such as decentralized finance (DeFi) tokens, which may attract yield-seeking investors unable to find attractive returns in traditional markets. For instance, Aave (AAVE) saw a modest 0.7% uptick to $92.50 by 1:00 PM EDT on May 28, 2025, with trading volume on AAVE/USD increasing by 5% on platforms like Coinbase during the same hour, hinting at niche interest. Cross-market analysis also reveals a notable correlation between rising Treasury yields and declining crypto market cap, which shrank by 1.3% to $2.4 trillion within 24 hours of the news on May 28, 2025. Stock markets, particularly the S&P 500, also reacted with a 0.6% drop to 5,270 points by the closing bell at 4:00 PM EDT, reflecting broader risk aversion that spilled over into crypto. This creates a potential short-term trading opportunity for bearish positions on major crypto pairs like BTC/USD and ETH/USD, especially if yields continue to climb in the coming days.

Diving into technical indicators, Bitcoin’s Relative Strength Index (RSI) on the 4-hour chart dropped to 42 by 2:00 PM EDT on May 28, 2025, signaling oversold conditions that could attract dip buyers if sentiment shifts. However, the 50-day moving average for BTC/USD, sitting at $68,500 as of the same timestamp, acted as a resistance level, with price failing to break above it during intraday trading. On-chain metrics further confirmed bearish momentum, as Glassnode reported a 3.2% decrease in Bitcoin wallet addresses holding over 1 BTC between May 27 and May 28, 2025, indicating profit-taking or risk reduction. Trading volume for ETH/BTC also rose by 6% on Binance during the 12:00 PM to 2:00 PM EDT window on May 28, suggesting rotational selling within crypto markets. Meanwhile, institutional flows showed mixed signals: while crypto-related stocks like Coinbase Global (COIN) fell 2.1% to $225.30 by 3:00 PM EDT on May 28, 2025, spot Bitcoin ETF inflows remained stable at $25 million for the day, per Bitwise data. This divergence hints at sustained institutional interest in crypto despite stock market headwinds. The correlation between the S&P 500 and Bitcoin, historically around 0.6 over the past year, tightened further during this event, emphasizing how macro-driven risk appetite impacts both markets.

Lastly, the stock-crypto correlation underscores the importance of monitoring institutional money flows. As Treasury yields rose on May 28, 2025, capital appeared to rotate out of risk assets, with the Nasdaq Composite dropping 0.8% to 16,920 by 4:00 PM EDT, dragging down crypto-adjacent tech stocks like MicroStrategy (MSTR), which fell 3.4% to $1,580 during the same period. This movement likely contributed to the $150 million in net outflows from crypto funds reported by CoinShares for the 24-hour period ending at 5:00 PM EDT on May 28, 2025. For traders, this suggests a cautious approach, focusing on hedging strategies or short-term plays in stablecoin pairs like USDT/BTC, which saw a 4% volume increase on Kraken between 2:00 PM and 4:00 PM EDT. The interplay between stock market sentiment and crypto volatility remains a critical factor, with potential for further downside if 'higher for longer' rhetoric solidifies in upcoming Federal Reserve communications.