Bitcoin’s recent trajectory has become a subject of debate, as crypto investor Chang expresses concerns about macroeconomic factors that could impede its upward movement. Chang specifically points out the instability in bond yields compared to the issuance of US Treasury bonds as a significant threat. The rising bond yields, driven by ongoing concerns over US debt and increased bond supply, could pose challenges for various asset classes, including cryptocurrencies.
The data reveals that the 10-year Treasury yield, a crucial indicator, has risen by 24 basis points in two weeks, reaching 4.55%. Analysts suggest that if it surpasses 4.7%, it could create volatility in the stock markets. Typically, high bond yields result in higher borrowing costs, reducing the attractiveness of riskier investments like Bitcoin and technology stocks.
Chang predicts that yield fluctuations will persist throughout June, possibly leading to a closer correlation between Bitcoin and traditional stocks.
As the yield on two-year Treasury bonds approaches 5%, it becomes more appealing for macro investors to shift their funds from riskier assets to safer government bonds that offer stable returns. Peter Oppenheimer of Goldman Sachs emphasizes that rising yields could significantly impact all asset classes, causing ripple effects across financial markets.
Investors are closely monitoring the Personal Consumption Expenditures (PCE) price index, a crucial indicator that influences the Federal Reserve’s interest rate decisions. The 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 the level of March. Additionally, a monthly increase of 0.3% 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 further tightening of bond yields. Currently, Fed funds futures indicate that investors are only pricing in a modest 35 basis point rate cut for this year.
Disclaimer: The information provided in this article should not be considered investment advice. Investors should be aware of the high volatility and risks associated with cryptocurrencies and conduct their own research.
