Yields on U.S. sovereign debt declined Thursday after the Federal Reserve eased monetary policy by slashing interest rates by 0.25 percentage points.
What happened: The benchmark 10-year Treasury yield dropped by 0.8 basis points to 4.335%, while the yield on 2-year government bonds slid 2 basis points to 4.197%.
Similarly, rewards on 6-month treasuries dipped 1.3 basis points to 4.127%.
Treasury bonds are considered low-risk investments because the U.S. government backs them, making it unlikely that the government will default on its debt obligations.
Comparing these rewards with those offered by the digital asset industry painted an intriguing picture.
The annualized average yield rate for staking Ethereum ETH/USD, the second-largest cryptocurrency, stood at 3.39% as of this writing, according to Staking Rewards, marking a decline of 14 basis points in the last 24 hours.
On the other hand, stakers of Solana SOL/USD, the fourth-largest cryptocurrency, stood to earn 6.31% if they held their SOL for 365 days.
Solana's yield dropped more than one basis point in the last 24 hours and nearly 17 basis points over the week.
Ethereum’s price has faced pressure from rising Treasury yields over the past two months. As evident from the graph below, the cryptocurrency has shifted sideways while the yields have risen since the Fed’s previous rate cut in September.
Why It Matters: Yields on cryptocurrencies—otherwise considered to be risky investments—were first catching up as a talking point even in TradFi circles.
Last month, a research paper by asset management firm Ark Invest highlighted Ethereum's position as an "institutional-grade asset" with yield-bearing potential.
The firm added that Ethereum was beginning to develop attributes in the digital asset space similar to those of U.S. Treasury bills in the traditional space.
It's worth mentioning that, unlike sovereign bonds, which have a fixed term called the maturity period, cryptocurrencies like Ether and SOL can be staked for an indefinite period.
Additionally, like periodic interest payments in the case of yields, staking rewards are paid programmatically, depending on the specific blockchain network and staking protocol.
Price Action: At the time of writing, ETH was exchanging hands at $2,919.04. up 3.62% in the last 24 hours, according to data from Benzinga Pro. SOL was up 6.36% to $199.28.
Year-to-date, the two cryptocurrencies exhibited contrasting trajectories, with SOL nearly doubling in value this year, while Ether gained only 28%.
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