Fiscal-Driven Treasury Yields May Boost Demand for Bitcoin

Markus Thielen, founder of 10x Research, expects the US 10-year Treasury yield to reach 6% in the coming months. This increase may not necessarily be negative for Bitcoin if it's driven by concerns over America's fiscal deficit and debt.

The recent rise in Treasury yields has been more due to the US fiscal deficit and increased Treasury supply than by Federal Reserve tightening, according to CoinDesk. If the 10-year yield rises because of Fed actions, that would weigh on Bitcoin, Thielen said.

However, if the increase stems from concerns about the US fiscal deficit and debt, demand for alternative assets such as Bitcoin could grow. This dynamic has played out before: in 2022, the US 10-year yield surged to 3.88% due to Fed tightening, causing Bitcoin to fall 64%. Since late 2023, by contrast, the 10-year yield has risen 135 basis points to 5.23%, while Bitcoin has roughly doubled over the same period.

Dan Niles, founder of Niles Investment Management, also expects the 10-year yield could rise to 6% due to a widening US fiscal deficit and heavy bond issuance by artificial intelligence companies increasing demand for funds in the bond market.