The 30-year US Treasury yield has surged to 5%, a level only reached twice in the past two decades, prompting concerns among crypto analysts. This increase 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, the world's largest cryptocurrency by market value, is under pressure, trading at $75,670, down 2% over 24 hours. The rise in bond yields typically hurts risk assets like bitcoin, as investors seek more attractive, lower-risk returns.
With the 30-year Treasury yielding 5%, an almost risk-free return, investors may opt for bonds over bitcoin, leading to capital rotation out of non-yielding risk assets. The situation is further complicated by the strengthening US dollar, which is also weighing on gold prices.
The 10-year yield, a benchmark for borrowing costs, is also elevated, indicating financial tightening and increased borrowing costs, which may disincentivize risk-taking in both financial markets and the economy. The Federal Reserve's decision to leave 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, driven by the potential extension of the Iranian port blockade, has also lifted inflation expectations, further fueling the increase in bond yields. As a result, the macroeconomic backdrop remains challenging for crypto assets, with rising yields and a stronger dollar historically pressuring crypto valuations.