Cryptocurrencies fell on the board and Bitcoin is near US$26,000, which is about to break its support zone. In the last 24 hours, the leading cryptocurrency has fallen 1.5% while Ethereum is hovering around US$1,500.
Bitcoin: what are the factors that force its price
1. Delay in approval of spot exchange-traded funds (ETFs)
2. The increase in US Treasury bond yields caused a decrease in risk appetite.
3. It ceases to be a refuge from inflation.
BTC: how the rise in US Treasury bonds will impact
Recent increases in 10-year Treasury yields, which have reached highs not seen since 2007, have completely eroded risk appetite. Last Friday, the yield on these bonds exceeded 4.5% for the first time in more than a decade, reflecting the scenario of higher interest rates longer than the Fed has proposed. , to 5.142%, which is around the level last reached in 2006.
Treasury securities are considered risk-free because they are backed by the United States Government. The 10-year yield is therefore considered a benchmark risk-free rate of return against which the returns of other assets are compared.
The data clearly shows this decline in risk appetite. The equity risk premium, the difference between the earnings yield and the 10-year US Treasury bond yield, fell to -0.58, the lowest level since 2009, according to TradingView data.
Likewise, the S&P 500 has accumulated a cumulative decline of nearly 3% so far this quarter. For its part, bitcoin, which usually takes the creation of this index as a reference, is close to posting losses especially above 10% between July and September. The worse performance of Bitcoin is explained because, in addition to its greater risk, some experts consider it a leading indicator of the performance of equity markets.
“He is a risk asset that does not generate returns. As such, it will be negatively affected by a high dollar risk-free rate due to the rebalancing of the portfolio,” said Alex McFarlane, co-founder of Keyring Network. According to this expert, “the idea that we can continue to ignore market prices and sell BTC as an orthogonal part of the portfolio does not add up unless BTC can provide a risk-free rate, which cannot, unlike ‘proof-of-stake’ tokens (such as ).
BTC: why it is no longer a refuge against inflation
Last May, S&P noted in a report that, contrary to market belief, it is impossible to prove that bitcoin is a good inflation shelter. “The 2-year breakeven inflation rate moved into negative territory during the pandemic, when the yield on Treasury Inflation Protection Securities (TIPS) exceeded the yield on Treasury bonds. The historical correlation between the daily returns of the S&P Broad Digital Market Index (S&P BDMI) and inflation expectations indices are low, around 0.10,” said the manager.
