When safe assets compete with risk. Lessons from the 1960s–90s for bitcoin and stocks.

Financial markets’ risk-free rate, the yield on U.S. Treasury securities, is rising again. Crypto maximalists often dismiss this as background noise, but when the rate rises sharply, it often competes for capital with stocks and other assets. History shows that the resulting market adjustments tend to be painful.

Jurrien Timmer, director of global macro at Fidelity Investments, highlighted this dynamic in an X post, noting that rising Treasury yields from the 1960s through the mid-1990s made government bonds competitive with equities.

Investors who ignored the higher opportunity cost of capital learned the hard way from the 1987 crash, known as Black Monday. The Oct. 19 crash sent the Dow Jones Industrial Average plunging by 508.32 points, or 22.6%, in a single day. It’s still the largest one-day percentage drop in history.

Timmer’s reminder is timely, as yields have generally been rising since the Covid market crash in 2020, echoing the beginning of the multi-decade uptrend that started in the late 1950s. Right now, the 30-year yield is hovering at its highest level since 2007 and could rise further if Wednesday's U.S. CPI beats estimates, validating higher-for-longer Fed interest-rate expectations.