Rising global yields putting strain on crypto prices.

In late 2024, cryptocurrency markets enjoyed a strong rally, largely unaffected by rising global interest rates, but that may be changing as yields continue to climb.

Throughout the last quarter of 2024, the crypto sector experienced impressive gains, but the upward trend in government bond yields worldwide has become too significant to overlook.

The U.S. 10-year Treasury yield, widely seen as a global benchmark, rose to 4.70% as of Wednesday, approaching a multi-year high. This marks a more than 100 basis point increase since the Federal Reserve’s first rate cut in September. Meanwhile, in the U.K., the 30-year Gilt yield surged to 5.35%, reaching its highest level since 1998, with an increase of 105 basis points since September.

Other countries, including Germany, Italy, and Japan, have seen similar rises in yields. Japan’s 10-year JGB yield, although still modest at 1.18%, is the highest in almost 15 years.

While rising yields had little impact on cryptocurrency prices for much of the last few months, with Bitcoin and other digital assets reaching multi-year and record highs in early December, the situation has since changed. Bitcoin, for example, has fallen over 10% from its record high above $108,000 set just three weeks ago, with several other top cryptocurrencies suffering even steeper declines.

An exception to this global trend is in China, where bond yields are falling sharply amid concerns about deflation. The Kobeissi Letter highlighted in a recent post that China is facing its longest period of deflation since 1999.