When safe assets compete with risk. Lessons from the 1960s–90s for bitcoin and stocks.
Rising U.S. Treasury yields are creating increased competition for capital, potentially impacting the performance of stocks and bitcoin. Historical trends suggest that when risk-free rates rise, speculative assets face greater pressure to justify their valuations.
Why it matters
Understanding the relationship between interest rates and asset classes is essential for investors navigating current macroeconomic volatility.
Financial markets’ risk-free rate, the yield on U.S. Treasury securities, is rising again . Crypto maximalists often dismiss this as background noise, but when the rate rises sharply, it often competes for capital with stocks and other assets. History shows that the resulting market adjustments tend to be painful.
Jurrien Timmer, director of global macro at Fidelity Investments, highlighted this dynamic in an X post, noting that rising Treasury yields from the 1960s through the mid-1990s made government bonds competitive with equities.
Investors who ignored the higher opportunity cost of capital learned the hard way from the 1987 crash, known as Black Monday. The Oct. 19 crash sent the Dow Jones Industrial Average plunging by 508.32 points, or 22.6%, in a single day. It’s still the largest one-day percentage drop in history.
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