Bitcoin's Reaction to 10-Year Treasury Yield Surge is Subdued

Rising bond yields have significant implications for Bitcoin and crypto traders, as the two asset classes are increasingly interconnected. The recent surge in bond yields, particularly in the 10-year Treasury, has caught the attention of market participants. The yield on the 10-year Treasury rose, erasing most of its declines from previous days. This volatility in the bond market is a critical factor for crypto traders to consider, as it can influence the overall market sentiment and risk appetite.

The bond market's volatility is driven by various factors, including global economic developments and policy changes. As interest rates rise, bond prices typically fall, and this inverse relationship can create a ripple effect across different asset classes, including cryptocurrencies. The recent reversal in long-end yields highlights the sensitivity of the bond market to economic developments and policy changes.

For Bitcoin and crypto traders, the rising bond yields present both opportunities and challenges. On one hand, higher yields can make traditional fixed-income investments more attractive, potentially drawing capital away from riskier assets like cryptocurrencies. On the other hand, the volatility in the bond market can create trading opportunities for those who can navigate the changing landscape. The historical volatility of crypto markets, which operate 24/7, makes them particularly susceptible to shifts in broader market conditions.

Crypto markets are known for their high volatility and are attractive to technical traders who engage in scalping and technical trading. However, the recent surge in bond yields adds an additional layer of complexity to the trading environment. Traders need to be aware of the potential impact of rising yields on their portfolios and adjust their strategies accordingly. Investors are expected to demand more term premium, or compensation for holding long-term bonds, given sticky inflation, higher-for-longer interest rates, and a volatile economic outlook.

When investors buy U.S. treasuries, they are paid a yield. As treasuries rise in high demand, the fixed income is lower; when the treasuries are not as sought after, the yield goes up. The rise in yields was instead a sign of harsher market forces at play—in particular, slow growth and more inflation. Trump’s tariffs could become “direct contributors to inflationary forces.”

In other words, as other countries retaliate against Trump’s strict tariffs, they could sell off U.S. treasuries. Rising yields in the face of falling equities sends a clear message: The market thinks the Fed’s hands are tied. If inflation proves stickier than expected, central banks may have no choice but to keep conditions tighter for longer, which is “not great for risk assets.” Bitcoin and the broader crypto market have typically traded with other risk assets like tech stocks, and have done well in a low-interest rate environment.

While Bitcoin was trading down, its reaction to rising bond yields wasn’t as inverse as stocks. Matthew Sigel, head of digital assets research at VanEck, noted that while 10-year Treasury yields surged, Bitcoin’s reaction was “notably subdued.” Unlike in 2022, rising yields did not trigger a wave of forced liquidations or volatility in crypto markets, suggesting that BTC may be decoupling from old macro sensitivities. The decoupling narrative—that Bitcoin is not trading like tech stocks—has been circulating lately. Could it be finally happening?