Bitcoin's price traded flat on Monday as rising bond yields and increased dollar demand continue to weigh on risk assets.
The world's largest digital asset by market capitalization has traded mostly flat over the past 24 hours, changing hands for $26,155 at 1:00 p.m. ET, according to CoinGecko. Recent hawkish tones from the Federal Reserve, rising bond yields, and uncertainty in China are encouraging a risk-off sentiment.
"Tighter monetary policy could be associated with reduced liquidity, greater dollar demand, and, potentially lower asset prices, particularly for assets that are thought of as dollar alternatives," Genesis trading head Gordon Grant told The Block.
The Fed's hawkish tone at Jackson Hole
At the Jackson Hole Symposium on Friday, Fed chair Jerome Powell reaffirmed the central bank's commitment to monetary tightening until its 2% inflation target is reached. U.S. Treasury yields increased after Powell's speech.
"The recent uptick in bond yields might prompt a temporary dip in bitcoin prices, as both individual and institutional investors engaged in BTC speculation seek to leverage this near-term downturn," Koinbasket CEO Khaleelullah Baig told The Block.
This view was reinforced by co-founder of Sei Labs, Jeff Feng, who said the Fed's hawkish stance and subsequent rise in bond yields suggest a shift in investor sentiment toward the relative stability of bonds.
"In an economic landscape marked by volatility and uncertainty, the consistent returns promised by bonds may be appealing, potentially drawing attention away from high-risk assets like bitcoin," he told The Block.
However, Grant underscored long-term dynamics that could deteriorate dollar demand such as "a serious discussion of diversification away from the dollar by major economic players." He emphasized Fitch's recent downgrade of U.S. Treasuries and Moody's credit rating cut of several regional U.S. banks.
"If the financial health metrics of the U.S. were to worsen, the future may not be so gloomy for bitcoin," he added.
Grant pointed to the economic contagion spreading from China as increasing the importance of digital assets. He highlighted that the amount of Chinese property debt offshore in distress is the same order of magnitude as the market cap of Ethereum.
"When we talk about how big our markets are, it's a stark reminder that in the world of tradfi 'paper' money, a few property investors have borrowed a few years more than the entire value of the number two blockchain, when people notice the economy is on such shaky footing, what will happen, and where will people turn?" he asked.
On Monday, shares of China Evergrande Group, the world’s most indebted property developer, plunged 87%. Since defaulting in 2021, the developer has struggled to finish projects and repay suppliers and lenders. Chinese authorities took limited measures on Monday in an attempt to contain the crisis, with Beijing halving the stamp duty on stock trading in an attempt to boost the struggling market.
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