Bitcoin Faces Tough Terrain as Treasury Yields Surpass 5

Bitcoin (BTC) has just completed its strongest third quarter since 2017, with a 43% gain, but the path ahead may be challenging as Treasury yields surpass 5%, making safer investments more appealing. Delphi Digital noted in its weekly newsletter that Bitcoin’s upward trend faces significant resistance, particularly from the Federal Reserve’s September rate hike and soaring Treasury yields, which have hit multi-decade highs.

Despite these headwinds, Bitcoin has managed to stay resilient, partly due to the growing interest in the debasement trade. This theory suggests that persistent government borrowing and currency expansion will weaken the dollar’s value. Vanessa Grellet, managing partner at Arche Capital, emphasized that the debasement trade doesn’t rely on low interest rates, as investors are increasingly focused on federal deficits and rising interest costs.

Last week, Bitcoin’s price briefly surpassed $87,000 before correcting lower. The cryptocurrency has gained over 35% since mid-August, shortly after the US Treasury announced plans to triple its long-dated debt buybacks, targeting 10- and 20-year notes. Some investors viewed this as a move to ease bond market strains and control borrowing costs.

The interest rate environment facing Bitcoin may ease after weaker-than-expected jobs data significantly reduced the likelihood of another Federal Reserve rate hike in October. The US economy added just 29,000 jobs in September, far below forecasts of 80,000. This has given the Fed more room to delay further rate increases. New York Federal Reserve Bank President John Williams noted that there is no urgency for another hike, and CME Group’s FedWatch Tool now puts the odds of an October increase at around 24%, down from over 75% a week earlier.