Rising U.S. Treasury Yields Are Putting Pressure on Bitcoin: So Why Is This Happening, and How Do We Recover?

Crypto analyst Darkfost said Bitcoin is facing one of the most challenging US Treasury yield environments since its inception. According to the analyst, high long-term US Treasury yields could continue to put pressure on risky assets.

According to Darkforth’s social media post, while the US federal funds rate and the dollar index have seen higher levels in the past, the current outlook for long-term bond yields presents a noteworthy picture for Bitcoin. Specifically, the fluctuation of 10-year and 30-year US Treasury yields between 4.5% and 5% indicates the continuation of tight financial conditions in the markets.

The analyst also noted that increased expectations of another interest rate hike this year are keeping funding costs high. Darkfost stated that this tightens liquidity conditions, and investors tend to increasingly turn to low-risk fixed-income assets during such periods.

This situation is considered a factor that could diminish the appeal of Bitcoin and other risky assets. This is because when long-term US Treasury bonds offer high yields, the additional yield premium that investors expect from more volatile assets can narrow.

The analyst noted that historically, increases in US bond yields have often coincided with tightening financial conditions, adding that this can put pressure on the Bitcoin price. According to Darkforth, the market is currently at a critical juncture, and the risk premium offered by risky assets compared to long-term bonds is tightening.

However, the analyst said that a different scenario is possible if the macroeconomic outlook becomes clearer in the coming period and investor confidence in the bond market increases again. In such a case, capital inflows into bonds may increase, yields may fall, and the investment environment for risky assets may improve again.

*This is not investment advice.