Bitcoin fell below $85,000 and ether dropped more than 3% on a day Treasury yields hit a 19-year high. About $18.1 billion of bitcoin and ether options expire on Friday.
Crypto's rally gave back ground on Wednesday.
Bitcoin traded near $84,230 on Coinbase in the early afternoon, down about 2.6% from roughly $86,520 in the morning. Ether fell about 3.3% to near $2,663, and Solana dropped about 3.5% to around $114.
Much of the market's attention has turned to Friday, when about $18.1 billion of bitcoin and ether options contracts are set to expire. Traders tied Wednesday's decline to positioning ahead of that event.
Dealers who sell options typically hedge by trading the underlying asset, and those hedges are adjusted or unwound as expiration approaches. A large expiration concentrates that activity into a few days.
The broader market offered little support. The 10-year Treasury yield rose to about 5.13%, its highest level since July 2007, after S&P Global's flash survey showed U.S. business activity growing at its fastest pace in five years and a Federal Reserve governor said more rate increases are likely needed. The Nasdaq Composite fell about 1.1%. The dollar climbed toward a two-month high, and gold fell more than 1%.
That combination cuts against one of the arguments behind this year's crypto rally. Part of the case for bitcoin has rested on the idea of a hedge against currency debasement. A day on which the dollar rises and gold falls alongside bitcoin is not a day that trade works.
Sentiment has cooled but not collapsed. The Crypto Fear and Greed Index read 71 on Wednesday, in "greed" territory, unchanged from the morning.
The pullback comes after a strong run. Earlier this week, U.S. spot bitcoin exchange-traded funds took in nearly $1 billion in a single session, their largest daily inflow since last October, and bitcoin traded near its highest level since January.
Friday's expiration is a natural pressure point. After it passes, the positioning that has shaped this week's trading will clear, and the market will have a better read on whether ETF buying returns or whether higher yields and a stronger dollar keep pressing on crypto prices.