Crypto Markets in Asia to be on Sidelines as Bond Yields Rise in the Region

Bond yields in most Asian countries have seen a steady increase recently. A rise in government-related bonds can act as a hook for many investors to stick to non-risky assets and keep their investments safe from volatility. However, the rising yields could also keep crypto markets pressured by denting the risk appetite of market participants in the region.

Bond Yields See Rise in Asia

According to a report by KraneShares in 2024, Asia’s high yield could beat the US and developed market investment grade due to overstated credit risks and low-interest rate risk. Currently, the value proposition in the Asia-Pacific area is superior to that of the majority of the global high-yield bond markets. This is because of strong regional corporate and economic fundamentals pointing to a rebound in multiple economies and industries, exposure to economies that may cut rates sooner than the Fed, and an aggressive selloff in 2022 caused by China’s real estate woes, which are only now starting to sort themselves out.

The report further highlights that the 60/40 portfolio for investment is returning. Investors are looking for wise, timely fixed-income investments as interest rates are above 5% for the first time in nearly two decades. Many investors flocked into investment-grade debt in 2023 as the fixed-income markets recovered, taking on duration risk in the hopes that the US Federal Reserve would act quickly to lower interest rates in 2024. The central bank did not, however, act as swiftly as traders had anticipated.

Asian Crypto Interest Tumbles

According to a new study, investors in Singapore and Malaysia are among those who have lost the most faith in cryptocurrencies following the crash of Sam Bankman-Fried’s cryptocurrency exchange FTX and the subsequent regulatory crackdown on the asset class. Both Singapore and Malaysia scored 4.12 out of 10 for crypto interest, placing them ninth and tenth in the research. Google searches for content about cryptocurrencies have decreased by 33% and 45% in Malaysia and Singapore, respectively. And since 2021, there has been an 82% decline in news articles about cryptocurrencies in Singapore, which is the fourth-biggest drop.

In other nations like India and China, tight government regulations have made investments difficult in the crypto sphere. Though the countries have not directly made a rule against crypto markets, a not-so-friendly stance towards the digital asset world is also clear in their governing policies.

Will Crypto Marks Face the Wrath?

Bond yields usually have an inverse relationship with crypto markets. According to Fortune, when a bond payoff exceeds market-based inflation forecasts, it is said to have a positive real yield. There is therefore less incentive to seek profits from other assets like crypto, equities, and gold.

With the current situation in Asia, crypto markets might stay on the sidelines for a little while. However, with future developments in the market, like the upcoming Bitcoin halving, markets will likely see a rebound and more investor traction in the near term.