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 yield makes bonds a more attractive investment, potentially leading to a decline in bitcoin and other risk assets. As Holger Zschaeptiz, a prominent macro commentator, noted, the current dynamic favors bonds over riskier investments. According to Diana Pires, chief business officer at sFOX, the attractiveness of yields and the Federal Reserve's tight monetary policy will continue to pressure 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 of bonds over the potential volatility of crypto. Rising yields also weigh on gold, which fell over 1% to a one-month low. Vikram Subburaj, CEO of Giottus exchange, noted that historically, rising Treasury yields and a stronger dollar have 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 recent surge in oil prices has lifted inflation expectations, contributing to the increase in bond yields. The Federal Reserve's decision to keep rates unchanged, combined with internal dissent, has pushed up expectations for higher-for-longer interest rates. This development has caught markets off guard, with three out of 12 voting officials pushing back against easing language in the statement.
As a result, bitcoin is feeling the effects of the hawkish signal, according to Matt Mena, senior crypto research strategist at 21shares. The bond yield surge is not just about the Fed, but also about the oil rally and elevated inflation expectations.
Until the Federal Reserve signals a near-term shift in its monetary policy, the macro backdrop is likely to remain a headwind for crypto.