The reaction of Holger Zschaeptiz, a prominent macro commentator, to the 30-year US Treasury note yield hitting 5% encapsulates the sentiment of many crypto analysts, who view rising yields as a challenge for bitcoin. According to Diana Pires, chief business officer at sFOX, the 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.
This is particularly relevant as bitcoin is already under pressure, with its price down 2% over 24 hours, alongside an uptick in the Dollar Index. The increase in bond yields typically hurts bitcoin and other risk assets because bonds become more attractive, offering a nearly risk-free return. As a result, capital rotates out of non-yielding risk assets like bitcoin, leading to decreased valuations.
Rising Treasury yields and a stronger dollar have historically pressured crypto valuations by tightening financial conditions, as noted by Vikram Subburaj, CEO of Giottus exchange. 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, driven by concerns over Iranian port blockades, has further lifted inflation expectations, contributing to higher yields.
The Federal Reserve's decision to keep rates unchanged, coupled with internal dissent over easing language, has pushed up expectations for higher-for-longer interest rates, affecting bond yields and, by extension, bitcoin's prospects. As Matt Mena, senior crypto research strategist at 21shares, noted, the hawkish signal from the Fed has thrown a bucket of ice on the market's pivot party, impacting bitcoin as an indicator of risk.