Bitcoin’s ability to stay above 100,000 USD is limited by rising bond yields and a stronger U.S. dollar. Is the end of the Trump trade that took Bitcoin to a new all-time high of 108,000 USD?
Bond yields are skyrocketing
Yields on U.S. Treasury bonds have risen sharply since the central bank first cut interest rates. This week, the yield on the 30-year Treasury note hit its highest level in 14 years, while the yield on the 10-year Treasury note climbed to 4.70%.
This has put significant pressure on risky assets and led to a wave of selling in global financial markets. Markets have struggled particularly in recent days as inflation remains a problem and economic data remains robust.
Overall, this creates a situation that is unlikely to point to lower interest rates, so for now, the market appears to continue to suffer from higher yields in the US bond markets.
Why are higher bond yields negative for Bitcoin?
First, higher bond yields mean that investors can earn a relatively high income simply by investing their capital with the U.S. government.
In other words, if they think a 4.70% yield over the next 10 years is more attractive than Bitcoin at 93,000 USD, that puts downward pressure on the price.
Second, high bond yields are creating negative pressure on the economy. These rates are affecting mortgage rates and other key economic sectors, which is likely to lead to an economic slowdown in the long term.
This, in turn, puts a strain on potential corporate profits, which pulls down stock prices – and Bitcoin typically has a high correlation with stock markets.
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