The 30-year US Treasury yield has reached 5%, a level only seen twice in the past two decades, prompting concerns among crypto analysts. This surge in bond yields is attributed to a combination of factors, including dissent within the Federal Reserve, rising oil prices, and increased long-term inflation expectations. As a result, bitcoin, the world's largest cryptocurrency by market value, may face headwinds due to the attractiveness of bonds as a low-risk investment alternative.
The yield on the 30-year Treasury note has been rising, making it a more appealing option for investors, which could lead to a capital rotation out of risk assets like bitcoin. According to Diana Pires, chief business officer at sFOX, 'As long as yields remain attractive and monetary policy stays tight, capital has a real alternative to risk, pressuring assets like crypto.' The rise in bond yields is also affecting other risk assets, such as technology stocks, and even gold, which fell over 1% to a one-month low. The stronger dollar is further exacerbating the situation, historically putting pressure on crypto valuations by tightening financial conditions. The Federal Reserve's decision to leave rates unchanged, coupled with internal dissent, has pushed up expectations for higher-for-longer interest rates, contributing to the increase in bond yields.
The surge in oil prices, which reached their highest level since 2022, is also lifting inflation expectations, making bonds more attractive. As Vikram Subburaj, CEO of Giottus exchange, noted, 'Rising Treasury yields and a stronger dollar have historically pressured crypto valuations by tightening financial conditions.' The current macro backdrop, characterized by rising bond yields, a stronger dollar, and elevated oil prices, is likely to remain a headwind for bitcoin and other risk assets.