📊The decline in government bond yields has triggered market turmoil, and Bitcoin prices have responded by falling?

In the past two days, Bitcoin prices have experienced a maximum drop of nearly 10% on Tuesday and Wednesday, falling from a high of $102,500 to a low of $92,500. Meanwhile, the decline in U.S. government bond yields seems to have had a ripple effect on the entire market.

The drop in bond yields usually indicates a waning interest from investors in risk assets, who turn to seek safer havens. This shift in sentiment may have also impacted cryptocurrencies like Bitcoin, leading to significant price fluctuations.

Bitcoin prices have recently fallen for two consecutive days, likely due to two main reasons;

First, on Tuesday, the decline in U.S. bond prices led to an increase in government bond yields, causing a general drop in risk assets, and the market's excitement about the new administration quickly faded. When the dollar depreciates and prices rise, the coupon and the principal returned at maturity of bonds will depreciate, leading the market to sell these bonds at discounted prices, which results in rising bond yields.

However, when government bond yields soar, market excitement about the new administration quickly diminishes, prompting investors to reassess risks, leading to a drop in prices of high-risk assets like Bitcoin.

Second, the previous surge in Bitcoin prices may have been due to the market's earlier rise based on positive expectations for the new government, and when government bond yields rise or other macroeconomic factors emerge, these expectations are challenged, leading investors to reassess their investment decisions.

Additionally, the Nasdaq Composite Index was also affected, with major tech stocks dropping nearly 2% yesterday, further indicating a decline in overall market risk appetite.

According to new data released by the Institute for Supply Management, economic growth in December was faster than expected, raising concerns about intensifying inflation in the dollar and a loss of confidence in U.S. government bonds.

Nevertheless, several individual and institutional financial analysts have made optimistic predictions for Bitcoin's price in 2025, and the overall sentiment towards Bitcoin's continuous rise since January has also remained relatively bullish. However, in the short term, fluctuations in government bond yields and changes in market sentiment will continue to influence Bitcoin prices.

💬What are your thoughts on the recent fluctuations in Bitcoin prices and changes in government bond yields?

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