Key Insights:
- Government bond yields are on the rise globally, with the U.K.'s 30-year Gilt yield reaching its highest point since 1998.
- Despite earlier resilience, rising rates are starting to impact crypto prices.
- China stands out as an anomaly, where bond yields are dropping due to deflationary pressures.
Market Overview
The crypto market experienced a notable surge in the final quarter of 2024. However, the persistent increase in government bond yields worldwide seems to be a significant factor that is now gaining attention.
Recently, the U.S. 10-year Treasury yield approached 4.70%, just shy of a multi-year high, having risen over 100 basis points since the Federal Reserve's first interest rate cut in September.
The U.K. has seen an even sharper increase, with the 30-year Gilt yield hitting 5.35%, surpassing levels not seen since 1998.
Interest rates have surged not only in the U.S. and U.K. but also in other major economies, including Germany, Italy, and Japan, where the 10-year JGB yield noted its highest level in almost 15 years at 1.18%.
Despite the increases in yields, many cryptocurrencies, including Bitcoin, surged to all-time highs in early December. Nevertheless, Bitcoin has since dropped over 10% from its peak of more than $108,000 just weeks prior. The varying performances of cryptocurrencies indicate that while they may not have been significantly impacted by previous yield increases, their recent downturns could be attributed to changing economic conditions.
In contrast, China's falling yield reflects its ongoing deflationary concerns, marking its most extended deflation period since 1999.
