Bitcoin Drops to $84K as Bond Yields Hit 5.11%: What Next?

Bitcoin (BTC) has shed 2.06% in value in the day, missing the $87,000 resistance line and pulling back to $84,425 at press time. Other than rising speculations of increased aggressiveness in the Middle East conflict, the drop is also a short-term consequence of the recent hike in US government bond yields.

Bitcoin drops amid spike in US bond yields

The 10-year US Treasury yields have risen to 5.11%, a level last witnessed during the 2007 global financial crisis.

Source: TradingView

Other than geopolitically induced inflationary fears, the hike is also a result of the recent US Federal Reserve interest rate hike. This, in addition to a recent statement from Fed Governor Michael Barr, has fueled speculation of additional interest rate hikes.

Worsening matters is America’s national debt, which has crossed the $40 trillion threshold. The government is now forced to issue additional Treasury debt to cover its budget shortfalls. At the same time, artificial intelligence (AI) entities are also massively borrowing to cover infrastructure growth costs. This intense debt issuance has tightened competition for investor funds, forcing yields higher.

The hike has in turn narrowed the gap between US and foreign nations’ yields, causing the latter to rotate their capital back home. China, for instance, has reduced its stockpile of US Treasuries by 11% over the course of the year.