Peter Schiff Warns Bond Bear Market Could Persist, Rising Rates a Headwind for Bitcoin

Economist Peter Schiff warned that the U.S. bond bear market is still in its early stages, cautioning that rising interest rates could weigh on both equities and the cryptocurrency markets, including Bitcoin. Speaking in a September 16 interview with Bitcoin Magazine, Schiff stated that U.S. Treasury yields are likely to rise further, while dollar weakness and inflation pressures drive preference for gold and tangible assets.

Schiff assessed that the bond market has already collapsed, noting that the bull market ended in 2020 when 10-year Treasury yields fell below 1%. He explained that the 40-year bull run peaked at a point where yields dropped to sub-1% levels before the current bear market began. Although yields have risen to around 5%, Schiff believes the downturn is far from over, potentially reaching well above 6%.

He referenced historical context, noting that when bond bull markets started in the past, 10-year Treasury yields were as high as 16%. Schiff also highlighted that U.S. credit risk is worse today than in 1980, citing massive debt and Federal Reserve pressure to monetize debt as factors driving higher inflation. Bondholders will demand higher rates to compensate for purchasing power losses, he said.

Schiff dismissed the idea that the Fed could counter rising rates by expanding bond purchases, stating that printing more money would only push markets to demand even higher yields. He warned that if trust in the dollar weakens—since Treasuries are dollar payment promises—the rationale for holding bonds diminishes, with central banks shifting reserves toward gold instead.

On inflation, Schiff advocated for significant government spending cuts, including across Social Security, Medicare, and defense budgets, though he acknowledged such measures could trigger short-term economic challenges like recession, rising unemployment, falling stock and real estate prices, and increased loan defaults. He criticized political leaders for delaying tough decisions, stating that postponing action only makes crises worse when they eventually arrive.

Regarding the dollar, Schiff noted that while a full-blown crisis hasn't yet materialized compared to other fiat currencies, purchasing power has already declined rapidly based on gold and cost-of-living metrics. He argued that even modest Fed rate hikes of 0.25% or 0.50% are 'too little, too late' to curb inflation, calling market optimism about such moves a form of wishful thinking.

Schiff predicted that while temporary bond rallies might occur, they could quickly reverse as 10-year Treasury yields approach 5.25%, with the market likely viewing 5% as merely an intermediate step toward rates exceeding 6%. He concluded that if rising interest rates exert significant selling pressure on equities, cryptocurrencies like Bitcoin would also face headwinds.