Bitcoin Selloff Continues as Global Bond Yields Reach Multi-Year Highs

Global bond yields have surged to multi-year highs, causing a selloff in risk assets, including Bitcoin. Long-term government yields across the US, Japan, and Europe have risen significantly, while the US Treasury yield briefly crossed 5.3%. In response, U.S. equities came under pressure, with high-beta technology stocks weakening, and Bitcoin retreated to around $77K.

This appears to contradict the debasement trade thesis, which argues that investors demanding higher yields on long-term government debt signals growing concern over fiscal sustainability and strengthens the case for scarce assets. However, in the short term, investors can now earn historically attractive returns from government bonds without taking comparable market risk, drawing liquidity away from risk assets.

Higher Treasury yields increase borrowing costs and raise the discount rate applied to future earnings, putting additional pressure on growth stocks and other high-beta assets. The recent comments from Fed Chair Kevin Warsh have been interpreted as hawkish, pushing market-implied odds of a September rate hike above 60% and adding further pressure to Bitcoin and high-beta equities.

However, the longer-term implications of the bond selloff point in a different direction. Rising yields increase the government's refinancing costs and interest expense, putting further pressure on already large fiscal deficits. The U.S. Treasury has responded by expanding its long-duration liquidity-support buybacks, but if yields continue rising despite intervention, pressure for stronger measures grows.