Like Bitcoin $BTC$66,010.81 It is regaining its footing, optimism has returned to the market and several observers view the recent price rally as the start of a decisive bull run for valuations well beyond last year’s high of $126,000.
But a retrospective examination of trends in Bitcoin and Nasdaq valuations, adjusted for the cost of capital represented by the US 10-year yield (US10Y), suggests that the bull runs may be more measured. (check today’s signal)
Both $BTCThe /US10Y and Nasdaq/US10Y ratios failed to eclipse their 2020-2021 highs, even as their dollar-denominated prices set new records over the past 12 months. In other words, when adjusted for the cost of capital, the real macroeconomic highs for bitcoin and the broader tech sector likely occurred in 2020-2021.
This divergence between nominal prices and yield-adjusted valuations can be resolved in two ways. Either interest rates collapse, reducing the denominator and propelling these ratios to a new breakout, or the dollar prices of these assets fall to realign with the structural weakness revealed by the ratios.
The latter scenario seems the most likely for two reasons. First, recent rhetoric from Fed officials has remained decidedly hawkish, with some even raising the possibility of interest rate increases.
