A 6% yield on the 10-year Treasury could put pressure on bitcoin, but analysts say the reason behind the increase may matter more than the level itself.
The benchmark U.S. Treasury yield has been moving higher for months, raising borrowing costs throughout the economy. Some analysts now expect it to reach 6%, a level last seen in 2000.
For bitcoin and other assets without traditional cash flows or built-in yields, such as gold, the impact of higher Treasury rates depends on what is pushing them upward.
If yields rise because investors are demanding more compensation for holding government debt amid concerns over large deficits, the implications could differ from a rise caused by stronger economic growth or aggressive Federal Reserve tightening. In the fiscal-risk scenario, higher yields could reflect concerns about the sustainability of U.S. government finances, potentially increasing interest in alternative assets such as bitcoin.
A recent CoinDesk analysis found that bitcoin has generally maintained a limited correlation with Treasury yields over longer periods.
“When yields rise because the Fed is tightening, bitcoin suffers. When yields rise on fiscal and term-premium concerns, the picture flips,” Markus Thielen, founder of 10x Research, said in a note to clients Tuesday. He expects the 10-year yield to climb to 6% in the coming months.
How Bitcoin Reacted in 2022
The market’s response during the 2022 rate-hike cycle highlights the distinction.
The 10-year yield more than doubled that year, reaching 3.88%, as the Federal Reserve moved aggressively to contain inflation with multiple 50- and 75-basis-point rate increases.
Bitcoin fell 64% during 2022. Rising yields and tighter monetary policy contributed to the downturn alongside a series of crypto scams, bankruptcies and market failures.
The relationship has changed since the end of 2023. Over that period, the 10-year yield has climbed 135 basis points to 5.23%, its highest level since 2007. Bitcoin, by contrast, has roughly doubled to $86,000, even after retreating from its October record above $126,000.
Thielen and other analysts have connected the latest rise in Treasury yields to concerns about government finances and an increase in the term premium. Investors are seeking additional compensation for holding long-duration bonds as they assess risks surrounding inflation and government borrowing.
Strategic Analytics, a Chicago-based firm, has made a similar argument about gold. It said gold has increasingly reflected fiscal concerns rather than simply following the Federal Reserve’s policy path since 2022.
“Since 2022, gold has increasingly tracked fiscal-risk perceptions – term premium, deficits, debt sustainability – rather than the Fed’s policy path. Gold is not defying real yields. It is pricing fiscal sustainability and currency debasement, which has become the marginal driver,” the firm said in a recent LinkedIn post.
Why 6% Is on the Table
The forecasts for a 6% 10-year yield are largely based on concerns about U.S. debt and strong nominal economic growth, which is measured before adjusting for inflation.
Thielen pointed to the gap between Treasury yields, nominal GDP growth and federal debt expansion. The 10-year yield is at 5.24%, below nominal GDP growth of 6.56%, while federal debt has increased at an annual pace of roughly 8.5% since 2020.
“The key point is that yields still sit well below nominal GDP growth (5.24% vs 6.56%), and far below the roughly 8.5% annual growth of federal debt since 2020, so bondholders are not yet being compensated for the pace at which the nominal economy and the debt stock are expanding,” Thielen said.
Dan Niles, founder of Niles Investment Management, also identified 6% as a plausible upside level for the 10-year yield in a CNBC appearance.
Niles cited federal deficits of around 6% of GDP and said major AI companies, or hyperscalers, are competing with the U.S. Treasury for funding in debt markets.
The government is issuing large amounts of debt to finance persistent deficits while AI companies are also seeking substantial funding. Increased competition for available capital can raise borrowing costs and push Treasury yields higher.
For bitcoin, the key issue is therefore not simply whether the 10-year yield reaches 6%. If the increase is driven by renewed aggressive Fed tightening, the market could face conditions similar to those that hurt bitcoin in 2022. If fiscal concerns and a higher term premium remain the main drivers, the relationship could look different.
