The uptick in the bond yield, also known as real yield, has some observers worried about potential risk aversion in stocks and the broader financial market. Some crypto observers, however, expect Bitcoin (BTC) and digital assets, in general, to stay resilient, said Richard Usher, head of OTC trading at BCB Group.
Treasury inflation-indexed securities are indexed to inflation – the non-seasonally adjusted U.S. city average all items consumer price index for all urban consumers. The Bureau of Labor Statistics publishes the data.
Inflation-adjusted yields on U.S. government bonds have been rising after a nearly three-quarter lull, which has led to renewed risk-taking in all corners of financial markets. The five-year real yield has broken out of a nine-month consolidation pattern, signaling a continuation of the rally from December 2021 lows. So far, Bitcoin and Nasdaq have ignored the uptick in the real yield.
Per Ben Lilly, a crypto economist at Jarvis Labs, the increasing real borrowing cost may actually bring more capital to productive sectors like blockchain over the long run. It just speaks to the normalization of the cost of capital. Many tend to lean into the narrative of crypto when things get bumpy and that’s fine. I like to view crypto as a way to boost productivity. And when we look at the cost of capital being normalized, capital can start to be allocated to things that will bring higher productivity in the years to come, Lilly told journalists.
Rising real rates can put the brakes on economic growth and reduce the incentive to invest in risky or zero-yielding assets like Bitcoin and gold. Bitcoin and Wall Street’s tech-heavy index Nasdaq have historically moved in the opposite direction of real yields. Most macro traders, sensitive to changes in interest rates and inflation-adjusted bond yields, left the crypto market during last year’s price crash, leaving long-term HODLers in control.
The typical investor in Crypto or Tech stocks is looking for a higher potential return or is investing for the longer term in the sector or asset class growth. Hence I suspect the rise in real yields is more a headache to blue chip stocks than to markets like technology or crypto and will not disrupt the medium-term growth story, Usher added.
Per Ben Lilly, a crypto economist at Jarvis Labs, the increasing real borrowing cost may actually bring more capital to productive sectors like blockchain over the long run. I expect the normalization of yields to bring more money into areas of innovation like smart contracts, programmable money, and DeFi, which are expected to boost productivity, he added.
The latest spike in real yields could bring more capital to the crypto and blockchain sectors. Inflation-adjusted yields on U.S. government bonds have been rising after a nearly three-quarter lull, which has led to renewed risk-taking in all corners of financial markets. Rising real rates can put the brakes on economic growth and reduce the incentive to invest in risky or zero-yielding assets like Bitcoin and gold. Most macro traders, sensitive to changes in interest rates and inflation-adjusted bond yields, left the crypto market during last year’s price crash, leaving long-term HODLers in control.
The typical investor in Crypto or Tech stocks is looking for a higher potential return or is investing for the longer term in the sector or asset class growth. Hence I suspect the rise in real yields is more a headache to blue chip stocks than to markets like technology or crypto and will not disrupt the medium-term growth story, said Richard Usher, head of OTC trading at BCB Group.
Per Ben Lilly, a crypto economist at Jarvis Labs, the increasing real borrowing cost may actually bring more capital to productive sectors like blockchain over the long run. I expect the normalization of yields to bring more money into areas of innovation like smart contracts, programmable money, and DeFi, which are expected to boost productivity, he added.