Surging Yields Could Create Substantial Headwinds For Cryptocurrencies
Yields have been rising across the board, a development that could potentially spell trouble for risk assets like cryptocurrencies and stocks.
This changing environment could drive investors away from risk assets by causing them to flock to interest-bearing financial instruments offering some of the highest yields in years.
This could development might serve as a significant bearish factor for cryptocurrencies like bitcoin and ether, which do not provide their holders with regular payments, placing downward pressure on their prices and causing them to suffer losses.[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Recently, the yields on 10-year Treasury notes have repeatedly approached 4%, a level they have not reached for several years, CNBC data shows.
Today, this measure attained a high of 3.9780%, additional CNBC figures reveals. With the exception of late September, when the 10-year Treasury yield hit 3.9920%, this was the loftiest level since 2008.
Yields on two- and five-year Treasurys have also climbed to their highest in over a decade, rising to the most since 2007.
The former increased to 4.335% today, close to the more-than 15-year high of 4.36% it attained September 27, additional CNBC data indicates.
Yesterday, the latter yield rose to 4.2340%, the highest since September 27, when it also managed to notch a 15-year high, further CNBC figures reveal.
Bitcoin’s Relative Price Stability
It is worth noting that bitcoin prices have remained relatively stable lately, holding up even as many measures of yield have been reaching their highest levels in years.
The world’s most prominent digital currency has been trading between roughly $19,000 and $20,400 since late September, CoinDesk data shows.
Since October 7, this range has been even tighter, as the digital asset has been fluctuating between approximately $19,000 and $20,000, additional CoinDesk figures specify.
Earlier this month, analyst Tim Enneking emphasized this stability, describing it as being particularly impressive.
“BTC’s strength of support around $20k has been astounding!” he stated.
Enneking, managing director of Digital Capital Management, elaborated, noting that the situation is “virtually unique in the price history of Bitcoin.”
When explaining this shift in bitcoin volatility, the market expert pointed to the shifting demographics of investors, emphasizing the rising incidence of larger investors entering the space.
“We attribute this to a change in the average BTC investor profile: more institutions and more whales (which have actually themselves sometimes become institutional investors),” he stated.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.