A 6% U.S. Treasury Yield: Could It Be Good News for Bitcoin This Time?
Analysts who expect the U.S. 10-year Treasury yield to reach 6% say the outlook could shift in Bitcoin’s favor if the rise is driven by concerns about public debt rather than rapid Fed rate hikes.
According to CoinDesk, Markus Thielen, founder of 10x Research, expects the U.S. 10-year Treasury yield to climb to 6% in the coming months, a level last seen in 2000. Dan Niles, founder of Niles Investment Management, also considers that level possible.
Rising Treasury yields increase borrowing costs across the U.S. economy. But for Bitcoin, the same move can have two different causes: the Fed tightening monetary policy, or investors demanding higher yields because they are concerned about the U.S. fiscal position.
What matters for Bitcoin is why yields are rising
In Thielen’s assessment, the Fed rapidly raising interest rates to curb inflation puts pressure on Bitcoin. By contrast, yields rising because of large budget deficits, growing public debt, and the risks of holding long-term bonds can support interest in alternative assets such as Bitcoin.
When investors tie up their money in bonds for a long time, they want additional compensation for uncertainties such as inflation and future government borrowing. According to Thielen, the increase in this extra yield, known as the term premium, is one of the main reasons for the recent rise.
It fell 64% in 2022, but the picture changed afterward
In 2022, during the Fed’s rapid rate hikes, the 10-year Treasury yield more than doubled, reaching 3,88%. Bitcoin, meanwhile, lost 64% of its value that year; crypto industry bankruptcies and fraud cases added to the impact of tighter monetary policy.
Since the end of 2023, however, Treasury yields and Bitcoin have risen together. According to the comparison in the report, the 10-year yield rose 135 basis points to 5,23%, its highest level since 2007. Bitcoin also nearly doubled over the same period, reaching around 86.000 dollars. This comparison shows that every increase in Treasury yields does not produce the same result for Bitcoin.
The U.S. Treasury and AI companies are competing for the same capital
Thielen compares the Treasury yield of about 5,24% with economic growth of 6,56%, not adjusted for inflation. He also points out that U.S. federal debt has grown by about 8,5% a year since 2020, arguing that bond investors are not yet earning adequate returns given these growth rates.
Niles points to the budget deficit reaching about 6% of U.S. gross domestic product and large AI companies turning to the same pool of capital as the U.S. Treasury to borrow. As the government borrows to finance deficits and technology companies borrow to expand their investments, that competition can push yields higher.
The scenario analysts see as positive for Bitcoin is one in which the rise is fueled by these fiscal concerns. If the Fed resumes rapid rate hikes, however, the risk of a repeat of the pressure seen in 2022 comes to the fore.