like bitcoin regains its footing, optimism has returned to the market and the recent price surge is seen by several observers as the start of a decisive bull run for valuations well beyond last year’s high of $126,000.
But a look back at the trends in Bitcoin and Nasdaq valuations, adjusted for the cost of capital represented by the US 10-year bond yield (US10Y), suggests that bull runs may be more measured. (check today’s sign)
Both the BTC/US10Y and Nasdaq/US10Y ratios have failed to eclipse their 2020-2021 peaks, despite their dollar-denominated prices setting new all-time highs over the past 12 months. In other words, when adjusted for the cost of capital, the true macroeconomic highs for bitcoin and the broader tech sector likely occurred in 2020-21.
This divergence between nominal prices and performance-adjusted valuations can be resolved in two ways. Either interest rates collapse, reducing the denominator and driving these ratios toward a new breakout, or the dollar prices of these assets decline to realign with the structural weakness revealed by the ratios.
The latter scenario seems more likely for two reasons. First, recent rhetoric from Federal Reserve officials has remained decidedly hawkish, with some even raising the possibility of interest rate hikes.
