The 30-year US Treasury yield has reached a significant milestone, hitting 5% and sparking concerns among crypto analysts about the potential consequences for bitcoin. This development has been attributed to a combination of factors, including dissent within the Federal Reserve, elevated oil prices, and rising long-term inflation expectations. As a result, bond yields are increasing, making them a more attractive option for investors and potentially leading to a decline in bitcoin's value. According to experts, the dynamic is straightforward: as long as yields remain high and the Fed's monetary policy stays tight, capital will have a real alternative to risk, putting pressure on assets like crypto.
Bitcoin is already under pressure, trading at $75,670, down 2% over 24 hours, while the Dollar Index hovers above 99. The rise in bond yields typically hurts bitcoin and other risk assets, as investors opt for the almost risk-free return offered by bonds over the volatile cryptocurrency market. Every dollar invested in bitcoin is a dollar not earning the 5% yield, leading to capital rotation out of non-yielding risk assets.
Rising yields also weigh on gold, which fell over 1% to a one-month low. The 10-year yield, a benchmark for borrowing costs, is also elevated, pointing to financial tightening and disincentivizing risk-taking.
The Fed's decision to keep rates steady, combined 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 has also lifted inflation expectations, further driving up yields. As a result, the macro backdrop remains a headwind for crypto, with flows favoring yield and safety over volatility.