Rising U.S. Treasury yields are putting increased pressure on the crypto market, especially Bitcoin. Recent analysis shows that rising U.S. Treasury rates are increasing the opportunity cost of holding Bitcoin for investors, potentially reducing interest in the digital asset.
Rising risk-free yields on U.S. government bonds are making alternative investment vehicles such as Bitcoin and gold less attractive, according to the analysis. For investors looking for a safe haven, government bonds offer higher interest rates, making them more attractive compared to volatile crypto assets.
The yield on the two-year US Treasury note rose to 4.05%, the highest level in 12 months. This increase was driven by changes in market expectations regarding monetary policy. Investors had originally expected the Fed to cut rates at least twice by the end of the year, but recent economic data has largely undermined those expectations.
Consumer price index and producer price index both exceeded expectations in April, showing that inflationary pressures are rising again. As a result, while expectations for a rate cut have receded in the market, the possibility of further rate hikes has also emerged.
The probability of a rate hike in December rose from 22.5% to 44% in just one week, according to data from CME Group’s FedWatch. This shift highlights the rapid shift in expectations regarding monetary policy.
Given these developments, Bitcoin price is trading flat around $81,000. Additionally, BTC is trading below its 200-day moving average of approximately $82,000. Technical analysts say the failure to break out of this level is putting pressure on the near-term outlook.
Experts say that if bond yields continue to rise, Bitcoin may become less attractive to institutional investors, but long-term investors may view macroeconomic fluctuations as an opportunity to accumulate.
*This is not investment advice.
