Bitcoin has kept most of its recent advance as the 10-year Treasury yield climbed to 4.80%, its highest since early 2025, with investors betting sticky inflation keeps the Fed hawkish and channels flows into the debasement trade.
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Bitcoin holds gains as 10-year Treasury yield tops 4.8%
A climb in the 10-year Treasury yield to 4.80%, its strongest level since early 2025, has not shaken Bitcoin, which is holding most of its recent advance as investors bet that sticky inflation keeps the Federal Reserve on a higher-for-longer path and deepens the case for owning a debasement hedge.
"Rising yields are usually a headwind for risk assets, but Bitcoin's resilience tells you the marginal buyer here is treating it as a hedge against currency debasement rather than a high-beta tech trade," Nina Volkov, a crypto macro analyst who previously traded fixed income, said.
The 10-year Treasury yield reached 4.80% on Tuesday, the strongest since early 2025, while the 5-year note touched 4.55%, its highest since October 2025, according to the Associated Press. The move follows Fed Chair Kevin Warsh signaling the central bank may still lift its short-term rate in coming months if inflation stays elevated, and Treasury Secretary Scott Bessent's unusual intervention last month to restrain the rise. In the euro zone, inflation jumped to 3.3% in August, the highest in three years, pushing 10-year German bunds to 3.35% and 10-year UK gilts to 5.14%.
The transmission chain runs through rate expectations rather than through the dollar. Higher-for-longer pricing typically strengthens the greenback and pressures gold and crypto alike, yet Bitcoin has diverged, holding its gains as investors frame the widening U.S. budget deficit — projected to top $2 trillion this year, about 6% of gross domestic product, with total federal debt at $40 trillion — as a reason to own a fixed-supply asset. The Congressional Budget Office's deficit estimate and the debt figure were both published last month.
The key level to watch is whether Bitcoin can extend its run above recent resistance as the next Fed decision approaches. A further climb in yields that forces Warsh's hand would test whether the debasement bid can absorb the traditional risk-off drag, while a pullback in yields on softer inflation data would remove the macro prop and expose how much of the rally rests on positioning rather than conviction.
The rates trade that favors Bitcoin
The setup inverts the usual logic that higher yields drain capital from speculative assets. When investors expect rates to stay high because inflation is sticky, they increasingly question the real return on nominal government debt, and Bitcoin's capped supply becomes a competing store of value. That framing has gained traction as borrowing costs climb across the developed world, with the U.S. 30-year fixed-rate mortgage near its highest level in a year and large technology firms borrowing heavily to fund AI data centers.
What could break the trade
The risk is that the debasement narrative is a fair-weather bid. If inflation cools enough for the Fed to signal cuts, the higher-for-longer thesis collapses and Bitcoin loses its macro justification, leaving it exposed to the same yield-driven selling that pressures stocks and gold. Conversely, a disorderly spike in yields — the kind of panic that would mark a genuine tipping point in the $40 trillion debt market — has not yet materialized, with default-risk measures across major economies staying contained, according to strategists at Macquarie.
This article is for informational purposes only and does not constitute investment advice.
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