Bitcoin Is Declining in Value as Bond Yields Rise. Cryptocurrencies Are at a Fork in the Road

<p>Cryptocurrencies are struggling to overcome rising bond yields. With regulatory constraints also increasing, the asset class may be approaching a tipping point.</p> <p>Bitcoin was down 2% in early trading, trading at $41,700. Ether, the second-largest cryptocurrency, fell 3.4% to $3,140. The yield on the 10-year Treasury note increased to 1.84 percent, continuing a rapid rise this year and exerting particular pressure on the technology sector.</p> <p>According to CoinMarketCap, the worldwide cryptocurrency market is down 2.9 percent to $2 trillion in market value, with Bitcoin accounting for 40% of the total.</p> <p>When the "risk-free" yield on Treasuries climbs, investors withdraw funds from technology and other highly speculative assets. Increased risk-free yields boost the discount rate used by investors to determine the present value of future cash flows. Because technology valuations are predicated on future cash flows, the logic predicts that today's prices for the assets should be lower.</p> <p>Increased rates also imply a drying up of market liquidity, syphoning out some of the leverage that has developed in crypto futures and other derivatives markets.</p> <p>The regulatory environment is also becoming more challenging as a number of foreign governments and banking institutions place additional regulations on cryptocurrency.</p> <p>Singapore issued a sweeping warning against cryptocurrency on Monday, emphasising that "the public should not be encouraged to engage in cryptocurrency trading." According to the Monetary Authority of Singapore, the country's central bank, cryptocurrency promotion should be limited to company websites and official social media accounts. Regulators appear to be outlawing cryptocurrency ATMs as well, claiming that they "mislead the public into trading...on impulse."</p> <p>According to analyst Marcus Sotiriou of digital-asset broker GlobalBlock, over 170 companies that applied for crypto licences in Singapore have either withdrawn their applications or been denied.</p