The 30-year US Treasury yield has reached a significant milestone, hitting 5% and sparking 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, the world's largest cryptocurrency, is facing downward pressure, trading at $75,670, down 2% over 24 hours. The strengthening US dollar, as indicated by the Dollar Index (DXY), is also contributing to the decline.
According to experts, rising bond yields typically hurt risk assets like bitcoin, as they offer a more attractive, almost risk-free return. Every dollar invested in bitcoin is a dollar not earning the 5% yield, leading to capital rotation out of non-yielding risk assets.
The 10-year yield, a benchmark for borrowing costs, is also elevated, pointing to financial tightening and increased costs for borrowing. This environment is expected to continue pressuring crypto valuations.
The recent surge in oil prices, driven by the potential extension of the Iranian port blockade, is further fueling inflation expectations and pushing yields higher. As long as yields remain attractive and the Fed's monetary policy stays tight, capital is likely to favor yield and safety over volatility, creating a challenging environment for crypto assets.