Crypto Prices Under Pressure From Global Rise in Yields

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What to know:

  • Government bond yields continue to rise, most notably in the U.K., where the 30-year Gilt yield is at the highest since 1998.
  • Rising rates for months haven’t appeared to be holding back crypto prices, but they have taken notice of late.
  • An exception to the global rate action is China, where yields are falling on deflationary conditions.

2024 saw crypto markets experiencing a significant bullish trend during the last quarter, but the increasing bond yields worldwide, particularly the U.S. 10-year Treasury yield that reached 4.70% by Wednesday and nearing a multi-year peak, seem to have gained too much momentum to be overlooked. The rise in this yield has been more than 100 basis points since the Federal Reserve reduced its fed funds rate in September.

In the U.K., the recent actions have been particularly pronounced, as the yield on the 30-year Gilt reached a peak of 5.35% on Wednesday, which is its highest level since 1998. Since the Federal Reserve’s first rate cut in September, this yield has increased by 105 basis points.

The significant increase in interest rates isn’t exclusive to the United States and the United Kingdom; countries like Germany, Italy, and Japan have also seen similar spikes. For instance, Japan’s 10-year JGB yield has reached 1.18%, marking its highest level in nearly 15 years, albeit a small percentage compared to other rates.

In the past few months, increasing yields didn’t seem to affect the movement of cryptocurrency prices, as bitcoin and various other digital currencies reached new or multi-year highs around early-mid December. However, the subsequent price trend tells a different story. For example, bitcoin has fallen by more than 10% from its record of over $108,000 set just three weeks ago, and several other major cryptocurrencies have dropped even further.

In contrast to the usual trend, there’s a significant decrease in yields in China due to concerns about deflation. As per a post on X by The Kobeissi Letter, China is currently enduring its longest spell of deflation since the year 1999.

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2025-01-08 18:52