The 30-year US Treasury yield has reached 5%, a level only seen twice in the past two decades, prompting concerns among crypto analysts. This surge in bond yields is attributed to the Federal Reserve's hawkish stance, elevated oil prices, and rising long-term inflation expectations. As a result, bitcoin, already under pressure, may face further decline.
According to experts, rising yields typically hurt risk assets like bitcoin, as they offer a more attractive, almost risk-free return. Every dollar invested in bitcoin means missing out on the 5% yield, leading to capital rotation out of non-yielding risk assets.
The strengthening dollar and rising yields have historically 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 Federal Reserve's decision to maintain rates, combined with internal dissent, has pushed up expectations for higher-for-longer interest rates, contributing to the rise in bond yields.
The oil price surge, driven by concerns over Iranian ports, has further lifted inflation expectations, driving yields higher. Overall, the macro backdrop remains a headwind for crypto, with flows favoring yield and safety over volatility.