Crypto optimists hoping Fed rate cuts will finally bring relief to bond yields and the U.S. dollar are running into a stubborn market reality. Despite growing confidence that policy easing is imminent, signals from Treasuries and FX markets indicate that the classic “lower rates = lower yields and a weaker dollar” setup isn’t holding.
The Federal Reserve is expected to trim rates by 25 basis points on Dec. 10, lowering the target range to 3.5%-3.75% and extending the easing cycle that began last September. Wall Street heavyweights like Goldman Sachs project further reductions in 2025, with rates potentially settling near 3%. Under typical conditions, such expectations would push Treasury yields down and soften the dollar—supportive conditions for risk assets, including bitcoin.
But the 10-year Treasury yield isn’t playing along. It remains anchored above 4% and has climbed roughly 50 basis points since the Fed delivered its first cut in mid-September 2024. Analysts point to mounting fiscal deficits, an influx of new government debt, and sticky inflation concerns as the primary drivers behind the market’s resistance to lower yields.
As Fidelity notes, a government taking on more debt must issue more bonds—and if demand doesn’t rise to match that supply, yields rise and prices fall.
Global forces are reinforcing that upward pressure. Markets are bracing for a potential Bank of Japan rate hike, and Japanese Government Bond yields continue to advance. For much of the past decade—and throughout the pandemic—Japan’s ultra-low yields helped depress global borrowing costs. Now the opposite is happening.
The dollar index is also proving less responsive to dovish Fed signals. With much of the easing already priced in, and with U.S. economic data consistently outperforming other major regions, the greenback has found support. Its downtrend, which began in April, stalled near 96.000 in September before rebounding toward the 100.00 mark multiple times.
Together, firm Treasury yields and a resilient dollar suggest a break from the old macro playbook. The long-held assumption that Fed dovishness automatically fuels a weaker dollar, lower yields, and a broad crypto rally may no longer fit today’s market regime. Bitcoin bulls, take note: the environment is shifting.
