BTC is down, the Nasdaq is down, and South Korean stocks have plunged 4%.
BTC fell from 87,000 to 81,000, and altcoins are drenched in red. You think the crypto market is just throwing a tantrum. Then you check U.S. stocks: the Nasdaq is down 0.71%, and semiconductor stocks are getting crushed. You check the news again, and South Korea’s KOSPI has plunged more than 4% at the open.
The 30-year U.S. Treasury yield: 5.70%.
When was the last time we saw this number? 2002. The dot-com bubble had just burst. The 10-year Treasury yield also surged to 5.32%, its highest level in 24 years.
That means you can buy U.S. Treasury bonds and sit back as you earn a 5.7% annual return, backed by the government’s credit, with zero risk.
Now tell me: what makes you think it’s worth putting your money in BTC? What makes you think it’s worth putting it in Nvidia?
That’s the gravitational pull of interest rates. When risk-free yields rise to this level, the appeal of every high-risk asset is being repriced.
And that figure hasn’t peaked yet.
The Fed just raised rates by 25 basis points in September. Meeting minutes released on October 7 showed that 9 of the 18 members thought there would be another hike before year-end. The market has already put the probability of a December rate hike above 80%. In other words, 5.70% is very likely not the peak.
Brent crude climbed above $110, and traffic through the Strait of Hormuz has yet to resume. Energy prices are directly pushing up inflation expectations. Meanwhile, US government debt continues to swell, and demand at Treasury auctions is weakening—supply exceeds demand, prices fall, and yields rise.
High rates + high oil prices + high fiscal deficits: this triple threat has no short-term remedy in sight.
On October 8, BTC fell below the $81,500 support level, triggering a cascade of leveraged liquidations. In 24 hours, $1.16 billion was liquidated across the market, 90% of it from long positions. 190,000 accounts were affected.
BTC ETFs saw $484.9 million in net outflows that day, the largest single-day outflow since June 25. Ethereum ETFs fared even worse, with net outflows every trading day since September 29. Since the start of October, Bitcoin ETFs have seen cumulative net outflows of $386.3 million—the “Uptober” rally has completely fizzled.
Altcoins are even worse. When BTC falls 3%, altcoins fall 10% to 30%. Order books are thin and liquidity is poor. The same $1 million sell order might move the BTC market by just 0.1%, but on some altcoin it could create a 5% gap.
But if you think this is just a problem with the crypto market, you’re badly mistaken.
The Nasdaq hit a record high in early October, then failed to hold on to it. At the October 12 close, the Nasdaq 100 was down 0.71%, with active selling battering the semiconductor sector.
BTC fell from 87,000 to 81,000.
The Nasdaq retreated from its record high.
South Korea’s KOSPI plunged more than 4% at the open.
Global risk assets are all falling into the same gravitational field. That gravity is interest rates.
The correlation between BTC and the Nasdaq has risen steadily over the past two years—and that’s no coincidence. In essence, they’re both “the longest-duration assets.” What does that mean?
Bonds have duration, which represents how sensitive they are to interest rates. The longer the duration, the more prices fluctuate when rates move. BTC, Nasdaq tech stocks, and small-cap stocks—all are assets whose stories are built on “future growth.” When future cash flows are discounted back to today, any change in rates can send their valuations swinging sharply.
The correlation between BTC and the Nasdaq is rising not because BTC has become weaker, but because when it comes to interest rates, all assets are just bonds with different durations.
The 30-year US Treasury yield at 5.70% is the master switch. When it tightens, the taps shut off for all risk assets at once.
What should you watch next?
On October 14, September CPI data will be released. This is the last inflation report before the FOMC meeting. Barclays and Morgan Stanley forecast that headline CPI could rise from 3.4% to 3.7%, with energy prices as the main driver.
If CPI comes in higher than expected, rate expectations will climb further, and risk assets could take another leg down. If it comes in below expectations, both BTC and the Nasdaq could get some short-term breathing room.
But remember: a breather doesn’t mean a reversal. The 5.70% Treasury yield is still there. It won’t disappear just because of one CPI report.