Investors are monitoring a U.S. Treasury yields rally, which reached their highest levels since August 13, 2007. Amid the declining global economy, the 10-year Treasury yield climbed above 4.8 percent on Tuesday.
Known informally as T-notes, Treasury notes are a low-risk, fixed-income investment that pays a set amount of interest every six months. The 10-year Treasury yield represents what the U.S. Treasury notes will return to investors ten years after they are bought.
The increase in yields is partially attributed to the Federal Reserve’s bond sales to fund the U.S. government’s expenses.
While the 10-year Treasury yield surged to 4.8 percent, the two-year Treasury yield increased to 5.144 percent. The 30-year Treasury yield surged to 4.924 percent, pointing to the fact that rates should remain elevated for a considerable amount of time.
The market’s prediction is that there’s a 25.7 percent possibility of a rate boost on November 1 and an almost 45 percent probability in December.
Rising yields are often associated with a strong economy, which incites investors to take on riskier investments. While most wouldn’t be interested in safe assets like the T-notes, many are now seeing this as a great opportunity to secure “risk-free” gains. Although no investments are completely risk-free, the T-notes come close if held to maturity.
With investors prompted to switch their portfolios away from risk assets, the struggling crypto market is facing a greater threat.
Matt Maley, chief market strategist at Miller Tabak, pointed out that investors have begun realizing that rates are not going down as quickly as they thought. The elevated rates are causing investors to rethink their investment strategies.
David Waugh, lead analyst at Coinbits, explained that Bitcoin and other cryptocurrencies have presented solid resistance in comparison with other assets like gold, which experienced a sharp decline as the T-notes surged. Waugh said that the potential approval of Grayscale’s Bitcoin ETF adds to the optimistic market sentiment.
However, if rates continue to increase, more investors may be enticed to pivot from Bitcoin and altcoins towards treasuries.
“Overall, while rising 10-year yields may exert transient downward pressure on Bitcoin and altcoin prices, intrinsic and extrinsic factors suggest that Bitcoin’s resilience in the face of broader asset volatility bodes well for its future trajectory,” Waugh said.
Crypto cold wallet reseller The Crypto Merchant owner Mark Venables is optimistic that crypto holders will not trade their digital assets for the fixed rate investment. However, should the economic condition worsen to the point where holders need to sell their assets, Venables predicts that alternative coins will suffer more than established coins like Bitcoin.
Greg Magadini, head of derivatives at Amberdata, a blockchain and crypto asset data company, predicts that the higher T-notes yield will prevent Bitcoin’s growth.
“Overall I think higher yields will prevent BTC from making new 2023 highs, even if the BTC Spot ETF is approved,” he said. “It’s more likely that any approval will lead to a quick rally that is quickly sold back down, as the Macro environment remains unattractive for risky investments due to higher risk-free yields.”
Things are not completely glum, however. Akash Mahendra, director of Haven1 Foundation, explained how some cryptocurrency projects could take advantage of the situation.
“Projects that hold significant cash reserves could find themselves in a favorable position by parking their assets in treasuries,” he said. “Protocols such as Maker (MKR) and Frax (FXS) stand to gain due to the fact that a portion of their protocol treasuries are invested in Treasury bonds.”
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