How many people don't know that a 1% drop in US Treasury yields actually results in a 22% annual return? That's also why a slight increase in US Treasury yields could lead to a significant drop in BTC? Let's first take a simple example: Suppose you spend $100 on a 30-year treasury bond bond with 5% coupon. One year later, the market maturity yield of this bond decreased from 5% to 4%. This year, you earned more than just $5 in interest. Because your bond can continue to pay a 5% coupon, while the market only requires a 4% yield, its price will rise to about $117. Adding the $5 interest received, your total return for this year is approximately 22%. Assuming to buy at face value, pay interest every six months, and reinvest without taxes or interest. The yield only decreased by 1 percentage point, while the price of long-term bonds increased by about 17%. The reason is that changes in interest rates will affect how much cash flow will be worth in the next few decades today. The longer the deadline, the greater the impact is usually. Conversely, as the yield increases, the price of old bonds will decrease. FINRA Bond Explanation Note that the 22% here refers to "interest+price increase" and is not an annual return that can be locked in by buying US bonds. So, what does this have to do with BTC? Firstly, as the returns on low-risk assets increase, taking risks becomes more cost-effective. Assuming that the annualized yield of short-term US bonds is only 1%, some people may think that leaving money yields too little, and it is better to use a portion to buy stocks or BTC. If the yield of short-term US bonds increases to 5%, his choice will change: Since bearing lower price fluctuations can yield certain returns, why do I still use the original price to buy assets with significant fluctuations The reason for using short-term US bonds for comparison here is that 30-year US bonds themselves may also experience significant fluctuations and cannot be used as a substitute for cash. For risky assets, investors often demand higher expected returns. If the judgment of the future remains unchanged, one way to achieve higher expected returns is to buy cheaper today. So, the original price of BTC may no longer be as attractive. Secondly, as the cost of capital increases, the number of people willing to borrow money and take risks will decrease. When the rise in US bond yields is accompanied by a tightening of the US dollar financing environment, the cost of borrowing and maintaining positions for institutions may also increase. Some originally cost-effective transactions, after deducting financing costs, become not worth doing. Investors may reduce leverage and lower their risk positions. If the price drop further triggers insufficient margin and forced liquidation, it will generate new selling orders: Tightening financing environment → reduction of positions → price decline → forced liquidation of some leveraged positions. This is also why changes in the macro environment are sometimes amplified by the cryptocurrency market. However, the funding rate of cryptocurrency contracts does not mechanically follow the yield of US Treasury bonds, it also depends on the supply and demand of long and short positions in the market. Thirdly, BTC does not have a fixed cash flow, and its price depends more on how much risk investors are willing to take on. Bonds can calculate future interest and principal; Stocks can analyze a company's future profits. BTC itself does not pay interest or dividends, so the previous bond formula cannot be directly applied to it. Its price depends more on the market's judgment of scarcity, future adoption, value storage demand, and future buying. When investors are willing to take risks and funds are easily accessible, these long-term expectations are more likely to be overvalued; When funds become expensive and risk appetite decreases, buyers may lower their quotes.