Warning for Bitcoin Optimists: The 10-Year Yield Is Holding Firm Even as Markets Price In Fed Rate Cuts

Crypto traders betting that Federal Reserve rate cuts will tame Treasury yields and weaken the dollar may be facing a new reality. Despite growing conviction that policy easing is on the way, market signals from bonds and FX suggest those expectations aren’t translating into the usual downward pressure.

The Fed is widely projected to trim rates by 25 basis points on Dec. 10, bringing the target range to 3.5%-3.75% and extending the easing cycle that began last September. Firms like Goldman Sachs even see rates slipping to 3% next year. Historically, an outlook like this tends to lower long-term yields and drag the dollar index down—conditions that typically bolster appetite for risk assets, including bitcoin.

Yet the benchmark 10-year Treasury yield is defying that playbook. It continues to oscillate above 4% and has risen nearly 50 basis points since the Fed’s initial rate cut in mid-September 2024. Market observers point to persistent fiscal worries, expectations for heavy government debt issuance, and lingering inflation concerns as the main forces keeping yields elevated.

Fidelity captured the dynamic bluntly: With U.S. debt swelling, more Treasury supply is hitting the market. Without stronger demand to absorb it, yields rise and prices fall.

Pressure is also coming from overseas. Traders are increasingly factoring in the possibility of a Bank of Japan rate hike, and JGB yields continue to climb. For over a decade—especially during the pandemic—ultra-low Japanese yields helped hold global borrowing costs in check; that era appears to be fading.

The dollar index, meanwhile, is showing declining sensitivity to Fed-dovish signals. With cuts largely priced in and the U.S. economy still outperforming other major markets, the greenback has refused to weaken meaningfully. The index’s months-long downtrend stalled near 96.000 in September before bouncing back toward the 100.00 level on multiple occasions.

Together, these developments point to a shift in macro mechanics. The old assumption—that Fed easing automatically forces yields and the dollar lower, clearing the way for a strong crypto rally—looks increasingly outdated. For bitcoin bulls, it may be time to adjust expectations and stay alert.