The yield on the 30-year US Treasury note has reached a two-decade high of 5%, sparking concerns among crypto analysts that rising yields will put pressure on bitcoin. This surge in bond yields is attributed to the Federal Reserve's hawkish stance, elevated oil prices, and increasing long-term inflation expectations. As a result, investors may opt for the relatively safer and more attractive yields offered by government bonds, potentially leading to a decline in bitcoin's value.
According to experts, the dynamic is straightforward: as long as yields remain high and the Fed's monetary policy stays tight, capital will seek alternative, lower-risk investments. The current market conditions, including an uptick in the Dollar Index, are already affecting bitcoin, which has dropped 2% in the past 24 hours. The rise in bond yields typically hurts risk assets like bitcoin, as investors can earn a nearly risk-free return of 5% from 30-year Treasury bonds, making non-yielding assets like bitcoin less attractive.
Furthermore, the strengthening dollar and rising Treasury yields have historically led to decreased crypto valuations by tightening financial conditions. The increase in bond yields is not limited to the US, as yields are also rising in the UK and other parts of the world, pointing to a global trend of financial tightening.