The crypto market has closely followed US economic conditions, often falling in tandem with equities during periods of monetary tightening. The relationship is now facing another test from the US Treasury’s 30-year bond.
The yield reached 5.16%, raising concerns about lending and the amount of money lenders want from risky assets.
Why is the 30-year yield important?
The yield on the US 30 Treasury crossed 5% on July 7th and remained above that level for 16 days. According to Kobeissi’s letterthis was the longest period above 5% since 2007.
Long-term yields reflect a number of forces, including expectations of rising inflation, Treasury supply, financial concerns, and the demand for government debt. Their current rise indicates that investors expect interest rates and borrowing costs to remain high.
Higher Treasury yields can push crypto by creating lower-risk assets and increasing expected returns from speculative assets.
However, the yield does not guarantee that investors are moving directly from crypto to government debt.
Bitcoin (BTC) already responded well after the Consumer Price Index (CPI) it came in below expectations. A sustained move above 5% could weaken the recovery by rekindling concerns about inflation and recession.
Is the Hormuz crisis driving productivity?
The oil crisis in the Middle East has increased concerns about rising prices, especially around the Strait of Hormuz. Iran said it had closed the waterway, while the US continued its efforts to protect trade routes.
The disruption pushed up energy prices, fueling concerns that rising oil prices would slow down inflation.
Crypto expert DarkFost said:
This is where Trump will need to defuse tensions with Iran.
However, the decline remains a researcher’s hope rather than a definitive outcome.
Despite the Treasury’s warning, US crypto exchange-traded funds continued to attract capital. SoSoValue data showed $667.32 million in Net Inflows across crypto ETFs tracked this week.
This was the strongest since the week beginning May 8, when revenues reached an estimated $771.2 million.
The difference shows that demand for cryptocurrencies will remain strong despite pressure from long-term yields.
A decrease in pressure around the Strait of Hormuz could reduce oil concerns and reduce prices.
Low energy prices could support appetite risk, especially if the Treasury pulls back in line with inflation expectations.
US M2 reached $23.05 trillion in May, according to Federal Reserve data.
However, this money cannot be considered as capital waiting to enter crypto. Meanwhile, index ETFs are showing resilience, while the 30-year yield is still a cautionary tale of risk-adjusted volatility.
