How a Treasury buyback tweak helped bitcoin surge 25% to nearly $80,000 in days

Bond yields had become a growing problem for risk assets. A bond’s yield is, in simple terms, the return an investor receives for holding it. When prices of existing bonds rise, their yields fall. When bond prices fall, yields rise.

U.S. government debt is generally treated as one of the safest places investors can put their money. Bitcoin pays no interest simply for holding it, so its return depends largely on the price appreciating.

The more an investor can earn from Treasuries with relatively little risk, the more attractive bitcoin and other volatile assets need to become before that investor is willing to move money up the risk curve.

“Yield could increasingly become Bitcoin’s competition,” said Hong Yea, co-founder and CEO of Grvt, in an email. “When risk-free yields are high, Bitcoin isn’t competing only with other risk assets. It’s competing with the return investors can earn for doing very little. That changes the hurdle rate for capital.”

“If investors can earn 4-5% in traditional markets, crypto has to offer a much stronger reason for capital to move up the risk curve,” Yea said. “When yields fall, that hurdle comes down. Capital becomes more willing to seek growth and risk again, which has historically been a much better environment for Bitcoin.”

How long-term rates influence markets

Long-term Treasury influence borrowing costs across the economy and are closely watched as a gauge of how tight financial conditions are. Higher long-term rates can make everything from mortgages to corporate financing more expensive and tend to reduce investors’ willingness to own assets whose value depends heavily on future growth or improving liquidity.