Why Soaring Bond Yields Signal a Shift Toward Alternative Assets Like Cryptocurrency

Last week, the bond market rebelled against the Fed.

Yields on the U.S. 10-year bond surged past 4% last week, continuing their relentless climb since the Federal Reserve's 50 basis point rate cut on September 18. Typically, long-term rates align with the short-term interest rates set by the Fed, but these are not typical times.

Take last Friday’s jobs report, for example. It was touted as a success, but it was mainly fueled by an unprecedented spike in government hiring, the largest ever outside of the pandemic response. This isn’t a sign of a robust economy; it’s a sign of excessive borrowing and money printing to fund unsustainable spending on government jobs that don’t drive real growth.

Currently, the U.S. is running a deficit that’s 6% of GDP, yet the economy is only growing at 3%. Without government spending, the economy would actually be contracting. This increasing government control over economic activity is setting us on a path reminiscent of the Soviet Union’s collapse.

Investors are starting to catch on. They’re moving away from Treasuries and pouring money into alternative assets.

The bigger problem is that neither major political party is addressing the looming crisis: America’s unsustainable debt and the potential insolvency of the federal government.

Eventually, the bond market may lose faith entirely, realizing that endless money printing can’t prevent a collapse. When that happens, demand for U.S. bonds could vanish overnight. And in that moment, the economic landscape of America will be irrevocably changed.

It’s Time To Diversify To Assets Outside Of Government Control

When 10-year bond yields rise, it generally indicates that the overall interest rate environment is tightening. This can make borrowing more expensive for businesses and consumers, potentially slowing economic growth.
Since bond prices move inversely to yields, higher yields mean falling bond prices, which can erode the value of fixed-income investments if held to maturity or sold before.

Increasing yields often reflect higher inflation expectations. Traditional bonds might not offer sufficient protection against inflation, as they provide fixed returns. Alternative assets like cryptocurrency could better hedge against inflation.

Unlike traditional currencies, which can be printed in unlimited quantities by governments, Bitcoin has a capped supply, which could, in theory, help preserve purchasing power.

There’s been noted an inverse correlation between Bitcoin’s price and the real yield on inflation-adjusted bonds. As real yields rise, making fixed income less appealing, Bitcoin might attract investors looking for higher potential returns or a store of value that’s not directly tied to interest rate environments.

With the bond market under pressure and government influence on the economy growing, it’s clear that traditional investments may no longer offer the security they once did. This is why diversifying with assets like Bitcoin is becoming essential. My Digital Money offers a secure way to invest in crypto through a tax-advantaged IRA or cash, giving you control in an uncertain economic landscape. In times like these, exploring alternatives outside of government influence might be the smart move.

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