Why a 23-Year High in Bond Yields Isn’t Scaring Bitcoin This Time

Bitcoin slipped toward $83,800 this week. However, an analyst says there is no need to worry yet. The move comes as US bond yields surged to levels not seen in decades, a move that has rattled traders across financial markets. The 30-year Treasury yield climbed to 5.4%, its highest level in 23 years, while the 10-year yield touched 5%, a level last reached in 2007, just before the global financial crisis.

The jump followed stronger than expected manufacturing data, with the widely watched PMI index coming in at 57 against expectations of 53.7, a sign the economy is running hotter than anticipated. Stronger economic activity has raised concerns that inflation could pick back up, pushing the probability of a rate hike at the Federal Reserve’s October 28 meeting to 73.1%.

Bond markets took a further hit after a weak auction of five-year US government debt. Demand from indirect buyers fell short, forcing the government to offer higher yields to attract sufficient interest, a pattern some traders compared to the sharp bond sell-off seen after past major policy shocks.

Rising yields typically signal that investors want a bigger premium to hold government debt for longer periods, reflecting concerns about the size of US federal debt, now above $40 trillion, and the country’s ability to service it without resorting to further money printing.

Despite the volatility in bond markets, Bitcoin has largely held its ground, staying above its 50-week moving average near $78,800, a level many experts watch as a signal of continued bullish momentum. The analyst said that Bitcoin’s current rally began during an earlier period of rising bond yields, when the US Treasury intervened to calm the bond market, a period that coincided with Bitcoin starting to outperform other major asset classes.

As long as Bitcoin holds above its 50-week average, some view pullbacks as buying opportunities rather than a reason for concern.