Oh.
This is how Holger Zschaeptiz, one of the most followed macroeconomic commentators on
His reaction also sums up the mood of several crypto analysts who see rising yields as a headwind for bitcoin. the world’s largest cryptocurrency by market value and a macro asset.
“At this point, the dynamic is simple. As long as yields remain attractive and [Fed’s monetary policy] remains tight, capital has a real alternative to risk. “This continues to put pressure on assets like cryptocurrencies, depending on liquidity and momentum,” said Diana Pires, chief commercial officer at sFOX, in an email to CoinDesk. sFOX is a San Francisco-based cryptocurrency premier trading platform and dealer designed for institutional investors, hedge funds, and corporates.
Bitcoin is already under pressure along with a rally in the Dollar Index (DXY). At the time of writing, BTC was trading at $75,670, down 2% in 24 hours, and the DXY was hovering around 99, looking to extend Wednesday’s 0.5% gain.
Here’s why rising bond yields often hurt BTC and other risk assets. When the U.S. government needs to borrow money, it issues bonds, and the yield on those bonds is the annual return that bond investors earn. So when yields rise, bonds become more attractive. A 30-year Treasury bond yielding 5% is an almost risk-free yield.
Therefore, every dollar invested in bitcoin is a dollar that does not generate that 5% return. That trade-off typically leads to a rotation of capital out of non-yielding risky assets, such as bitcoin and other risky assets like tech stocks. Rising yields also tend to weigh on gold, which fell more than 1% to a one-month low of $4,540 on Wednesday and last changed hands near $4,564.
“Rising Treasury yields and a stronger dollar [have] historically pressured cryptocurrency valuations by tightening financial conditions,” said Vikram Subburaj, CEO of India-based FIU-registered Giottus exchange.
Note that the 30-year yield is not the only one that increases. The 10-year yield, which serves as a benchmark for borrowing costs across the economy, is also high. Taken together, they signal a financial tightening, a situation in which borrowing becomes costly, discouraging risk-taking in both the financial markets and the economy.
Bond yields are also rising in the UK and other parts of the world.
Fed dissidents reject easing
The central bank left rates unchanged at 3.5% to 3.75%, as expected. What was not expected was internal dissent. Three in 12 election officials opposed the relaxation of language in the statement, a fact that has caught markets off guard.
This has raised expectations of higher interest rates for longer, which is being reflected in bond yields.
“The Fed’s decision to keep rates steady wasn’t the surprise, but those three dissidents who called for a strike on any easing guidance threw an ice bucket on the market’s pivotal party. It’s a classic hawkish sign, and since Bitcoin is typically a risk indicator, Bitcoin is feeling it,” Matt Mena, senior crypto research strategist at 21shares, said in an email.
ING characterized the so-called tough dissent from three officials as a warning shot aimed at incoming Fed Chairman Kevin Warsh, chosen by Donald Trump to replace outgoing Chairman Jerome Powell. “They may want to make it clear that they will not be easily convinced by their thinking that rates can be lowered over time,” the ING analysts said.
Interestingly, the policy statement released Wednesday contained no clear bias toward easing, reinforcing the message that the Fed is in no rush to pivot.
The oil rally is raising inflation expectations
Rising bond yields aren’t just about the Federal Reserve. Early on Thursday, oil prices rose to their highest level since 2022, with Brent briefly surpassing $125 a barrel, after Trump considered extending the blockade of Iranian ports. Additionally, oil prices have risen, largely fluctuating between $80 and $120 since the war with Iran began in late February.
As a result, energy prices at the gas pump are rising, raising long-term inflation expectations, as CoinDesk noted earlier this week.
All of this is raising yields.
“Inflation has not convincingly returned to its target, and the Fed is not signaling a change in the near term. Markets may want clarity on cuts, but the Fed is not budging yet. Until that changes, flows will continue to favor yield and safety over volatility. For cryptocurrencies, that means the macro context remains a headwind, not a tailwind,” Pires said.
