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, elevated oil prices, and rising long-term inflation expectations. As a result, bitcoin and other risk assets may face downward pressure.
According to experts, the dynamic is straightforward: as long as yields remain attractive and the Fed's monetary policy stays tight, capital will have a real alternative 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 dropped 2% over 24 hours. The rise in bond yields typically hurts risk assets, such as bitcoin and technology stocks, as they become less attractive compared to the relatively risk-free return offered by bonds.
CEO of Giottus exchange, Vikram Subburaj, noted that rising Treasury yields and a stronger dollar have historically pressured crypto valuations by tightening financial conditions. 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 unchanged, combined with internal dissent, has pushed up expectations for higher-for-longer interest rates, contributing to the rise in bond yields. The surge in oil prices, which reached their highest level since 2022, is also lifting inflation expectations and pushing yields higher.
According to Diana Pires, chief business officer at sFOX, the macro backdrop remains a headwind for crypto, with flows favoring yield and safety over volatility.