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Bitcoin‘s trajectory has sparked recent debates, with crypto investor Chang voicing concerns over macroeconomic factors potentially hindering its upward movement. Chang highlighted the instability in bond yields compared to the issuance of US Treasury bonds as a significant threat. Rising bond yields due to ongoing US debt concerns and increased bond supply could create challenges for various asset classes, including cryptocurrencies.
A Dangerous Situation for Bitcoin
Data shows that the 10-year Treasury yield, a key indicator, increased by 24 basis points in two weeks, reaching 4.55%. Analysts note that a move above 4.7% could cause volatility in the stock markets. High bond yields typically lead to higher borrowing costs, reducing the appeal of riskier investments such as Bitcoin and technology stocks.
Chang predicts that yield fluctuations will continue throughout June, potentially leading to a closer correlation between Bitcoin and traditional stocks.
As the yield on two-year Treasury bonds approaches 5%, it becomes increasingly attractive for macro investors to shift funds from riskier assets to safer government bonds offering stable returns. Goldman Sachs‘ Peter Oppenheimer emphasized that rising yields could significantly impact all asset classes, highlighting potential ripple effects across financial markets.
PCE Data Could Cause Trouble if Expectations Are Exceeded
Investors are closely monitoring the Personal Consumption Expenditures (PCE) price index, a key indicator influencing Fed interest rate decisions. Scheduled for release on Friday, this data serves as the Fed’s preferred inflation measure. If PCE data exceeds expectations, it could further strengthen the upward trend in bond yields by reducing investors’ appetite for riskier assets.
Forecasts predict that the April PCE Price Index will increase by 2.7% year-over-year, matching March’s level. Additionally, a 0.3% monthly increase is expected. Excluding food and energy prices, core PCE is projected to rise by 2.8% annually and 0.3% monthly. Significant deviations from these forecasts could affect market sentiment and potentially lead to adjustments in interest rate expectations.
A significant increase in the core PCE figure could weaken the justification for additional interest rate cuts, contributing to a further tightening of bond yields. Currently, Fed funds futures indicate that investors are pricing in only a modest 35 basis point rate cut for this year.
