As Bond Yields Climb, Bitcoin Might Boom – Believe It or Not

Rethinking the Bitcoin Playbook: Why Rising Bond Yields Aren’t Bearish Anymore

Conventional wisdom has long held that rising bond yields spell trouble for bitcoin. After all, when “risk-free” returns improve, what’s the incentive to hold volatile digital assets? But in today’s market, that old playbook may no longer apply.

Yields Rise Despite Cooling Inflation

April’s inflation data, released Tuesday, came in softer than expected. The Consumer Price Index rose 0.2% month-over-month—below forecasts—and brought annual inflation down to 2.3%, its lowest since early 2021.

Yet, instead of retreating, bond yields moved higher. The 10-year Treasury yield climbed to 4.5%, while the 30-year hit 4.94%, nearing levels not seen in almost two decades. It’s a move that confounded expectations—and revealed deeper market currents.

This Isn’t About Inflation Anymore

The sustained strength in yields despite moderating inflation suggests that traders are no longer focused solely on the Fed. What’s emerging instead is a market that’s preoccupied with U.S. fiscal policy.

According to Tolou Capital Management’s Spencer Hakimian, the bond market is reacting to expectations of massive fiscal expansion, particularly under a potential second Trump administration.

“Seeing yields climb on a soft CPI print shows how dominant fiscal concerns have become,” Hakimian posted on X. “Bitcoin, gold, and equities all benefit from this setup—bonds don’t.”

Trump’s tax plan, which includes $4 trillion in tax cuts and just $1.5 trillion in offsetting spending reductions, would add roughly $2.5 trillion to the deficit. That’s a major dose of stimulus—one that risk assets may price in quickly.

From Policy Rate to Policy Risk

What’s happening is a shift from rate-driven fears to debt-driven concerns. Arif Husain, CIO of fixed income at T. Rowe Price, believes bond markets are now trading on fiscal expectations rather than monetary policy alone.

“Fiscal expansion might support growth, but it adds real pressure to Treasury markets,” Husain wrote. “I expect the 10-year yield to approach 6% over the next 12 to 18 months.”

That pressure, however, may not drag down bitcoin—because the source of that pressure is not hawkish policy, but swelling deficits.

Debt Spiral and Sovereign Repricing

As macro strategist EndGame Macro noted, the rising yields reflect a repricing of U.S. sovereign risk, not a cyclical inflation scare. The risk is structural.

“When yields rise while inflation falls, the problem isn’t prices—it’s the solvency of the issuer,” they said on X. The concern: that higher yields trigger higher interest costs, which force more borrowing, pushing yields even higher. It’s a loop that threatens long-term debt sustainability.

In such a scenario, hard assets—particularly those outside the traditional financial system like bitcoin—stand to benefit.

The Liquidity Wildcard: Fed Intervention

If yields continue climbing, the Federal Reserve may be forced to act—not by cutting rates, but by engaging in yield curve control. That would involve purchasing long-term bonds to cap yields, say at 5%.

Such intervention would inject liquidity into the system—liquidity that often finds its way into assets like equities, gold, and crypto.

For bitcoin, that could create a powerful double tailwind: a structurally weaker bond market on one side and fresh monetary easing on the other.

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