Here's why bitcoin bulls should take a closer look at interest rates
This analysis suggests that Bitcoin's recent price gains may be misleading when adjusted for the cost of capital and rising energy prices. By comparing Bitcoin and Nasdaq valuations against the U.S. 10-year Treasury yield, the author argues that current market optimism may be premature and vulnerable to a sharp correction.
Why it matters
Understanding yield-adjusted valuations is critical for investors to distinguish between genuine growth and price inflation driven by macroeconomic factors like interest rates and energy costs.
As bitcoin BTC $ 65,998.56 regains its footing, optimism has returned to the market, and several observers are calling the recent price rise the start of a decisive bull run for valuations well beyond last year's $126,000 peak.
But a look back at trends in bitcoin and Nasdaq valuations, adjusted for the cost of capital represented by the U.S. 10-year yield (US10Y), suggests bull runs may be more measured. (check Today’s signal)
Both the BTC/US10Y and Nasdaq/US10Y ratios have failed to eclipse their 2020-2021 peaks, even though their dollar-denominated prices set new record highs over the past 12 months. In other words, when adjusted for the cost of capital, the true macro tops for bitcoin and the broader tech sector likely occurred in 2020-21.
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