As bitcoin $BTC$66,010.81 regains its footing, optimism has returned to the market, and several observers are calling the recent price rise the start of a decisive bull run for valuations well beyond last year’s $126,000 peak.
But a look back at trends in bitcoin and Nasdaq valuations, adjusted for the cost of capital represented by the U.S. 10-year yield (US10Y), suggests bull runs may be more measured. (check Today’s signal)
Both the $BTC/US10Y and Nasdaq/US10Y ratios have failed to eclipse their 2020-2021 peaks, even though their dollar-denominated prices set new record highs over the past 12 months. In other words, when adjusted for the cost of capital, the true macro tops for bitcoin and the broader tech sector likely occurred in 2020-21.
This divergence between nominal prices and yield-adjusted valuations can resolve in one of two ways. Either interest rates collapse, shrinking the denominator and propelling these ratios toward a fresh breakout, or the dollar prices of these assets decline to realign with the structural weakness revealed by the ratios.
The latter scenario appears the more likely for two reasons. First, recent rhetoric from Fed officials has remained decidedly hawkish, with some even floating the possibility of interest-rate increases.
