Bitcoin’s recent trajectory has sparked debates, as crypto investor Chang expresses concerns about macroeconomic factors that could impede its upward movement. Chang specifically highlights the instability in bond yields compared to the issuance of US Treasury bonds as a significant threat. The rising bond yields, due to ongoing US debt concerns and increased bond supply, could pose challenges for various asset classes, including cryptocurrencies.
The data shows that the 10-year Treasury yield, a key indicator, has increased by 24 basis points in the span of two weeks, reaching 4.55%. Analysts note that a move above 4.7% could lead to volatility in the stock markets. High bond yields typically result in higher borrowing costs, which reduces the appeal of riskier investments like Bitcoin and technology stocks.
Chang predicts that yield fluctuations will continue throughout June, potentially leading to a closer correlation between Bitcoin and traditional stocks.
As the yield on two-year Treasury bonds approaches 5%, it becomes increasingly attractive for macro investors to shift their funds from riskier assets to safer government bonds that offer stable returns. Peter Oppenheimer from Goldman Sachs emphasizes that rising yields could have a significant impact on all asset classes, creating potential ripple effects across financial markets.
Investors are closely monitoring the Personal Consumption Expenditures (PCE) price index, a key indicator that influences Fed interest rate decisions. The PCE data, scheduled for release on Friday, serves as the Fed’s preferred inflation measure. If the PCE data exceeds expectations, it could further strengthen the upward trend in bond yields by reducing investors’ appetite for riskier assets.
Forecasts predict that the April PCE Price Index will increase by 2.7% year-over-year, matching March’s level. Additionally, a 0.3% monthly increase is expected. Excluding food and energy prices, the core PCE is projected to rise by 2.8% annually and 0.3% monthly. Significant deviations from these forecasts could impact market sentiment and potentially lead to adjustments in interest rate expectations.
A significant increase in the core PCE figure could weaken the justification for additional interest rate cuts, contributing to a further tightening of bond yields. Currently, Fed funds futures indicate that investors are pricing in only a modest 35 basis point rate cut for this year.
Please note that the information in this article is not investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.
