The 30-year US Treasury yield has reached 5%, a level only seen twice in the past two decades, prompting concerns among crypto analysts about the potential impact on bitcoin. This surge in bond yields is attributed to a combination of factors, including dissent within the Federal Reserve, rising oil prices, and increasing long-term inflation expectations. As a result, investors may opt for the relatively safe and attractive returns offered by bonds, potentially leading to a decline in assets like bitcoin.
According to experts, the dynamic is straightforward: as long as yields remain attractive and the Fed's monetary policy stays tight, capital will seek alternatives to risk, putting pressure on assets like crypto. The current market conditions, including an uptick in the Dollar Index, are already affecting bitcoin, which has seen a 2% decline over 24 hours.
The rise in bond yields typically hurts risk assets like bitcoin, as investors can earn a nearly risk-free return of 5% from 30-year Treasuries, making non-yielding assets less appealing. Furthermore, the strengthening dollar and rising Treasury yields have historically pressured crypto valuations by tightening financial conditions. The increase in bond yields is not limited to the US, as yields are also rising in the UK and other parts of the world. The Federal Reserve's decision to leave rates unchanged, combined with the internal dissent among voting officials, has pushed up expectations for higher-for-longer interest rates, contributing to the surge in bond yields.
The oil price rally, which has seen prices reach their highest level since 2022, is also lifting inflation expectations, further fueling the rise in bond yields. Experts believe that until the Fed signals a near-term shift in its monetary policy, the macro backdrop will remain a headwind for crypto, favoring yield and safety over volatility.