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Rising Treasury yields highlight the capital competition facing bitcoin

CoinDesk notes the 30-year Treasury yield is at its highest since 2007, with bitcoin potentially needing stronger fundamentals than stocks because it has no earnings or cash flow.

Reported · Written up by our desk · Market Structure

CoinDesk’s newsletter highlights a potential headwind for bitcoin as the risk free rate, proxied by U.S. Treasury yields, rises and competes with stocks and other assets for capital.

The piece cites Fidelity Investments macro expert Jurrien Timmer, pointing to history from the 1960s through the mid 1990s when government bonds became competitive with equities, and warning that ignoring the opportunity cost of capital can end badly. It recalls Black Monday on Oct. 19, 1987, when the Dow Jones Industrial Average fell 22.6% in a single day.

CoinDesk says yields have generally been rising since the 2020 Covid market crash, and that the 30-year yield is hovering at its highest level since 2007. The newsletter adds that yields could move higher if Wednesday’s U.S. CPI comes in above estimates, reinforcing higher for longer Fed rate expectations.

The article argues that if yields rise, assets including stocks and bitcoin must justify their prices with stronger earnings or cash flows. It notes bitcoin’s valuation is more complex because it has no earnings or cash flow, instead relying on its role as a perceived digital gold and a hedge against fiat currency depreciation, and concludes that some bullish price forecasts may be overstretched.

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