The 10-Year Treasury yield recently hit 5.3%, its highest level since 2007, and a Motley Fool analyst argues the move is weighing on Bitcoin. At $84,000, Bitcoin sits about 33% below its all-time high.
The 10-Year Treasury yield recently hit 5.3%, its highest level since 2007. Issuers of CDs, bonds, and other fixed-income investments will need to raise their yields to stay competitive, which could draw investors away from stocks and other riskier assets.
Some investors might argue that Bitcoin is immune because it is becoming a safe haven against the debasement of fiat currencies. But at $84,000, Bitcoin remains about 33% below its all-time high of $126,000 from last October.
Why higher yields pressure Bitcoin
Writing for The Motley Fool, Leo Sun notes that more than 20 million of Bitcoin's maximum supply of 21 million tokens have already been mined. A scheduled halving occurs every four years, and Bitcoin's increasing difficulty will prevent its last token from being mined until 2140. That scarcity makes Bitcoin more comparable to gold than many other cryptocurrencies, so it is often considered a hedge against inflation and the devaluation of the U.S. dollar.
Gold, however, also usually faces pressure from rising yields. Rising yields strengthen the U.S. dollar, and that makes it more sensible for investors to shift from gold toward CDs, Treasuries, and bonds that pay guaranteed interest. Sun also writes that rising borrowing costs will prevent investors from taking riskier, leveraged bets and drive them to liquidate more volatile investments to fund fixed-income purchases.
What could lift Bitcoin from here
Sun argues that Bitcoin, which he calls digital gold, is exposed to the same headwinds. Many institutional investors will also rotate out of Bitcoin ETFs as Treasury yields rise, he writes.
As a result, Bitcoin and gold won't bounce back unless Treasury yields cool off and risk-seeking investors return to the market. Sun remains bullish on Bitcoin's long-term growth potential, but says the near-term pressure from rising rates could keep it from revisiting its all-time highs for the foreseeable future.
Source: The Motley Fool
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