Here's why bitcoin bulls should take a closer look at interest rates
Reported by CoinDesk · AI-assisted summary by ChikoCorp AI News Desk
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Bitcoin's recent price recovery to around $65,968 has reignited optimism for a sustained bull run and potential new all-time highs surpassing last year's peak of $126,000. However, analysis adjusting bitcoin and Nasdaq valuations for the U.S. 10-year Treasury yield—a proxy for the cost of capital—indicates these assets have not exceeded their 2020-2021 peaks on a yield-adjusted basis. This suggests that the true macroeconomic valuation tops for both bitcoin and the broader tech sector likely occurred during that earlier period, despite recent nominal price records.
This divergence between nominal price increases and yield-adjusted valuation metrics implies two possible outcomes: either a collapse in interest rates reduces the cost of capital and allows these ratios to break higher, or nominal prices must decline to align with the structural weakness revealed by current interest rate levels. The source highlights that the latter appears more probable given the Federal Reserve's continued hawkish stance, including discussions of potential further rate hikes, which maintain upward pressure on the cost of capital.
Compounding this dynamic is the recent strength of energy prices, particularly oil futures, which have outperformed bitcoin. The BTC to WTI crude oil price ratio has declined even as bitcoin's nominal price has risen, indicating that energy costs may be driving a fresh wave of cost-push inflation. This development raises concern that sustaining a robust bull market for bitcoin may be significantly more challenging than market participants expect. Should oil prices continue rising, the report warns of a possible sharp correction in nominal bitcoin prices to realign with yield-adjusted valuations.
In summary, while bitcoin has shown price resilience, broader macroeconomic factors—interest rates and inflationary pressures linked to energy costs—pose meaningful headwinds. The cost of capital remains a critical variable for assessing whether bitcoin's bull run can be sustained or if a notable price adjustment is imminent.