Treasury Yields Surge Above 5% as Cryptocurrency Market Faces Liquidation

The U.S. Treasury yields surged to above 5% on September 23, triggered by stronger-than-expected business activity data from S&P Global's SPGI.US. This economic growth is expected to continue, with an annualized rate of around 5%, and a third-quarter growth hovering near 4%. However, this acceleration in growth comes with rising inflation signals.

Rising oil prices have led to energy and transportation costs surging, while supply-chain bottlenecks and backlogged orders have created the most severe surge in input costs in four years. According to Chris Williamson, Chief Business Economist at S&P Global's SPGI.US Market Intelligence, this represents a potential downside risk to the inflation outlook.

The bond market reacted promptly, with the yield on the 10-year U.S. Treasury note climbing above 5%, reaching levels last seen around 2007. James Lavis, co-managing partner of the Bitcoin Opportunity Fund, believes that the U.S. Treasury's growing debt issuance is increasingly at odds with investors' concerns about a structural depreciation of the U.S. dollar.

The cryptocurrency market also felt the impact, with total liquidations across the market reaching $135.8 million within one hour of the PMI report release. Bitcoin-related liquidations totaled $47.4 million, while Ethereum accounted for $23.9 million. The sharp market reaction reflects the clash between investors' prior expectations and the deteriorating interest-rate environment.

For BTC to reclaim the $85,000 level, it will increasingly depend on fresh spot demand, as many of the short positions that had previously fueled price gains have already been liquidated. With Treasury yields above 5% and U.S. economic growth still outpacing expectations, buyers now must sustain the price rebound on their own.