Pressure on Bitcoin Intensifies — Iran Conflict and High Bond Yields Reduce Appetite for Risk

Bitcoin's price fell on Thursday and remained under pressure. The cryptocurrency is being affected by the escalating conflict between the US and Iran, as well as high US Treasury bond yields, which are reducing investor interest in risky assets.

The price of the world's largest cryptocurrency dropped 2.6% to $77,180.6, while the broader crypto market saw a widespread decline in prices.

The sharp rise in oil prices, in turn, has heightened concerns about the persistence of inflation and its impact on interest rates. The rising cost of energy increases expectations that central banks will maintain a stricter monetary policy stance, which pushes bond yields higher.

Market attention remains focused on the military confrontation between the US and Iran. The latest escalation of the conflict between the two sides is considered one of the most severe confrontations since the war began.

According to Iran, its forces struck 10 vessels near the Strait of Hormuz and the surrounding area, while the US reported that, as part of a retaliatory operation, five Iranian oil tankers were sunk.

The intensifying confrontation has put additional pressure on oil prices. Brent crude remained above the $100 mark, raising fears of a new wave of intensifying inflation.

The rise in oil prices is particularly significant for Federal Reserve policy, as high energy prices increase inflationary pressure and could contribute to the Fed maintaining a stricter stance.

Meanwhile, US Treasury bond yields also rose sharply this week. The yield on 10-year Treasury bonds climbed to approximately 4.9%, reaching one of its highest levels in recent years.

The US Treasury Department's plan to buy back $6 billion in long-term bonds also proved insufficient to calm investors, and selling pressure in the bond market continued.

High interest rates and bond yields typically have a negative effect on speculative, liquidity-dependent assets such as cryptocurrencies. Bitcoin has historically struggled to gain during periods of Fed rate-hiking cycles, as traditional assets offering higher yields become relatively more attractive to investors.