The 30-year US Treasury yield has reached 5%, a level only tested twice in the past two decades, prompting concerns among crypto analysts. This surge in bond yields is attributed to various factors, including hawkish dissent within the Federal Reserve, rising oil prices, and increasing long-term inflation expectations. As a result, bitcoin, the world's largest cryptocurrency by market value, may face downward pressure. According to Diana Pires, chief business officer at sFOX, the current dynamic is straightforward: as long as yields remain attractive and the Fed's monetary policy stays tight, capital will favor safer alternatives, putting pressure on assets like crypto.
The rise in bond yields typically hurts bitcoin and other risk assets because it provides an almost risk-free return, leading to capital rotation out of non-yielding assets. This, combined with a stronger dollar and rising inflation expectations, may continue to weigh on crypto valuations. Experts, including Vikram Subburaj, CEO of Giottus exchange, and Matt Mena, senior crypto research strategist at 21shares, agree that rising Treasury yields and a stronger dollar have historically pressured crypto valuations by tightening financial conditions. The recent surge in oil prices, which reached their highest level since 2022, has also contributed to higher inflation expectations, further driving up bond yields.
As Pires noted, 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.