The 30-year US Treasury yield has reached a significant milestone, hitting 5% and sparking concerns among crypto analysts. This surge in bond yields can be attributed to several factors, including the Federal Reserve's hawkish stance, elevated oil prices, and rising long-term inflation expectations. As a result, bitcoin, the world's largest cryptocurrency by market value, may face downward pressure.
With the US government needing to borrow money, it issues bonds, and the yield on these bonds represents the annual return earned by bond investors. When yields rise, bonds become more attractive, leading to a potential capital rotation out of non-yielding risk assets like bitcoin. This shift can also impact other risk assets, such as technology stocks, and even gold, which has fallen to a one-month low.
The rise in bond yields is not limited to the US, with yields also increasing in the UK and other parts of the world. The Federal Reserve's decision to leave interest rates unchanged, combined with internal dissent among voting officials, has contributed to expectations of higher-for-longer interest rates, further driving up bond yields. The current market conditions, characterized by financial tightening and rising inflation expectations, may continue to pose a challenge for bitcoin and other risk assets.