The 30-year US Treasury yield has surged to 5%, sparking concerns among crypto analysts that bitcoin may suffer as a result. This significant increase in bond yields is attributed to a combination of factors, including discord within the Federal Reserve, elevated oil prices, and rising long-term inflation expectations. As bond yields become more attractive, investors may opt for the relatively safe returns offered by government bonds over the volatility of cryptocurrencies like bitcoin.
With the US dollar also gaining strength, bitcoin's value has already begun to feel the pressure, trading at $75,670, down 2% over 24 hours. The dynamic at play is straightforward: as long as bond yields remain high and the Fed's monetary policy stays tight, capital will seek safer alternatives, putting pressure on assets like crypto.
The rise in bond yields is not limited to the US, with the UK and other parts of the world also experiencing increases. The Federal Reserve's decision to leave interest rates unchanged, coupled with the unexpected internal dissent from three voting officials, has led to higher expectations for interest rates, contributing to the surge in bond yields. The current environment, characterized by financial tightening and rising inflation expectations, is likely to continue weighing on crypto valuations. As one analyst noted, 'inflation is not convincingly back to target, and the Fed is not signaling a near-term shift,' leading to a macro backdrop that remains a headwind for crypto.