US Treasury yields are predicted to peak: Bitcoin will be favorable after the midterm elections

According to Woofun AI, analyst Benjamin Cowen pointed out that as the midterm elections approach, 10-year US Treasury yields are about to peak and fall, and this turn in macro trends will bring medium-term benefits to risky assets such as Bitcoin.

Historical laws and current data confirm Cowen's judgment. The 10-year US Treasury yield hit a high of 5.342% on October 1, the highest since early 2002. Looking back at the 2018 and 2022 midterm election years, yields both peaked from early October to mid-November, then began a downward channel between mid-November and December.

Although Cowen previously viewed 5% as a target value, he acknowledged that 5.4% to 5.6% is still a potential new range of values. After the Federal Reserve raised interest rates in September, market sentiment peaked around the October 28 meeting.

Notably, the probability of an October rate hike plummeted from 64% to 17.7% in a week, a sharp change reflecting bond traders' concerns about the Fed's insufficient tightening.

The immediate impact of macroeconomic fundamentals further supported expectations of falling interest rates. Given the low level of inflation and weak labor market conditions, there is reason for the Federal Reserve to suspend interest rate hikes. Employment data released in September showed only 29,000 new jobs. This weak data directly mitigated market fears of interest rate hikes.

Data compiled by Woofun AI showed that Bitcoin's performance was struggling last week under the highest yield pressure in 24 years, but within an hour after the employment data was released, investors who shorted Bitcoin lost about $27.5 million, and the price quickly rebounded. If 2-year US Treasury yields fall, the pressure on the Federal Reserve to raise interest rates sharply will ease further. Cowan expects interest rates to begin to fall in mid-November, soon after the midterm elections.

However, the long-term outlook remains uncertain. In other words, there is only a phased peak in the convenience rate, and the mitigation effect may also be very limited. Cowen emphasized that long-term interest rates will continue to rise over the next 10 to 20 years, which may continue to put pressure on non-yielding assets such as Bitcoin. Poor inflation data may still trigger a new wave of bond sell-offs, and investors need to be wary of the risks brought about repeatedly by the macro environment.