The recent rise in the yield of the US Treasury's 10-year benchmark bond, reaching the highest levels of the period, cast a shadow on the cryptocurrency market, especially Bitcoin.
Historically, higher interest rates have not been positive for Bitcoin, and the timing of this bond increase coincides with a period of uncertainty for BTC.
However, despite interest rates rising this year, Bitcoin's price has managed to survive. However, it has struggled to reach new highs as investors seeking regulatory certainty in crypto remain on hold.
The market is looking forward to two important events: the approval of the Bitcoin ETF and the Bitcoin halving, expected in the second quarter of 2024.
Todaro: “Bitcoin's All-Time High Comes Only After the Easing of Monetary Policy in the USA”
But Needham analyst John Todaro warns that higher bond yields could limit potential immediate gains. “We continue to view higher bond yields as a negative for Bitcoin and especially crypto more broadly,” Todaro said.
Todaro believes that easing monetary policy is necessary for Bitcoin to reach all-time highs.
Federal Reserve Chairman Jerome Powell recently acknowledged that price pressures have eased but affirmed the central bank's commitment to its 2% inflation target. This stance could further challenge Bitcoin's upward momentum.
Rob Ginsberg, an analyst at Wolfe Research, shares similar thoughts. “It will be really difficult for Bitcoin to gain any upward momentum as interest rates and real rates continue to rise,” he said. However, he stated that Bitcoin is trying to hold on above the $25,000 support, which may manifest itself in an upward direction when interest rate pressures decrease.
Despite these problems, some analysts remain optimistic about Bitcoin's durability. Callie Cox, an analyst at eToro, believes Bitcoin may continue to perform well, partly as a result of higher interest rates. Cox noted that Bitcoin recorded a 78% increase in a year when the FED increased interest rates four times.
Cox attributes this growth to a flight from altcoins due to bond yield concerns. “Bitcoin is seen as the safe haven of crypto,” he said. Cox attributes this growth to a flight from altcoins due to bond yield concerns. “Bitcoin is seen as the safe haven of crypto,” he said. “Cryptocurrencies appear to have many positive catalysts ahead, but bond yields are casting a dark cloud over the sector,” Cox added.
The analyst also stated that the flight to BTC is expected to continue for now.
*This is not investment advice.