Rising Treasury Yields Renew Pressure on Bitcoin and Stocks

Rising U.S. Treasury yields may intensify pressure on risk assets including Bitcoin, according to CoinDesk.

CoinDesk, citing Jurrien Timmer, Fidelity Investments' director of global macro, reported on August 11 that Treasuries became a competing asset to stocks during the long rise in yields from the 1960s through the mid-1990s. In a post on X, Timmer wrote that investors who ignored the rising opportunity cost of capital paid a steep price in the 1987 Black Monday crash.

Black Monday refers to the October 19, 1987, plunge in the Dow Jones Industrial Average, which tumbled 22.6% in a single day. It remains the largest one-day decline on record.

Timmer wrote that the broad rise in Treasury yields since the Covid-19 pandemic in 2020 resembles the early stage of the multidecade uptrend in rates that began in the late 1950s. The 30-year Treasury yield is now near its highest level since 2007, and a hotter-than-expected U.S. consumer price index reading this week could reinforce expectations that the Federal Reserve will keep rates higher for longer, pushing yields up further.

CoinDesk said higher yields increase the pressure on both stocks and Bitcoin to justify their valuations with stronger returns or cash flow.

Bitcoin faces a more complicated backdrop than stocks because it generates neither earnings nor cash flow. CoinDesk said its value depends entirely on the view that it is digital gold and a hedge against the erosion of fiat-currency value.

Capital that once flowed freely in pursuit of narrative and momentum now has safer alternatives, CoinDesk added. Against that backdrop, projections that Bitcoin could reach $500,000 or $1 million in the next few years look somewhat excessive.