Bloomberg reported on May 22 that bond traders are fully pricing in a Fed rate hike by the end of the year, with interest rate swaps suggesting the Fed’s benchmark rate will rise by at least 25 basis points by the end of 2026.
On the same day, Fed Governor Christopher Waller said that with inflation above target and the labor market stable, the Fed should eliminate its easing bias and called interest rate cut negotiations “crazy.”
Bitcoin lost the $76,000 level on May 22, a move related to uncertainty in the US and Iran and the Fed’s renewed interest rate forecast.
This price move is just part of the ongoing macro-repricing, as the tailwind from rate cuts that supported risk assets through much of early 2026 has turned into a risk of rate hikes, with bond markets taking over the role of setting financial conditions before the Fed formally takes action.
Kevin Warsh took office as Fed Chairman on May 22nd, and the FOMC unanimously elected him.
While Nomura has dropped its forecast for a 2026 Fed rate cut, citing persistent inflation and geopolitical risks, CME FedWatch pricing puts the probability of at least one 25 basis point rate hike by year-end at about 58%.
Yields on long-term government bonds were already rising before bond traders began pricing in rate hikes in earnest, with the 30-year bond yield hitting 5.201%, the highest level since 2007, and the 10-year bond yield hitting 4.69%, the highest level since January 2025.
Both numbers reflect the tightening of real borrowing costs well in advance of FOMC action, putting risk-free rates in direct competition with non-yielding assets.
In the case of Bitcoin, the opportunity cost of holding a non-yielding asset at these levels of US Treasuries increases as the market reprices the risk-free rate, and that repricing is already underway.
1999 parallel lines
The two-month correlation between U.S. stocks and the 10-year Treasury yield has reportedly fallen to -0.70, the lowest since 1999.
Charles Schwab strategist Kevin Gordon put the 30-day trend figure at about -0.68, explaining the structural conditions that are causing stocks and Treasury yields to move in opposite directions to a historically rare degree.
Global equity funds recorded their first weekly outflow in nine weeks for the period ending May 22nd.
BTC traded as a high-beta risk asset for most of 2025 and 2026, moving both up and down with stock market sentiment.
The -0.70 correlation puts stocks at a disadvantage against any further rise in yields, which tightens the liquidity environment for BTC and weighs on stocks, causing the cryptocurrency to decline as part of a broader risk complex.
Fed interest rate hikes, or the continued expectation of them, will attack BTC’s investment case through four mechanisms that build on each other.
| pressure channel | what will change | Why is it important for BTC? |
|---|---|---|
| liquidity | Rising expected policy interest rates weakens the rationale for easing financial conditions | Inflow of funds into speculative assets decreases |
| real yield competition | 10-year yield of 4.69% makes U.S. bonds even more attractive | BTC has no yield, increasing opportunity cost |
| risk appetite | When yields rise, stock prices fall | BTC gets caught up in broader risk-off movement |
| damage to the story | “Fed rate cut is coming” expires | One of crypto’s cleanest bullish macro catalysts weakens |
Higher expected policy rates reduce the likelihood of easing financial conditions, drawing potential liquidity away from speculative assets. With the 10-year Treasury yield at 4.69%, it becomes harder to ignore Treasuries as a cash cow, raising the opportunity cost of holding non-yielding assets.
As stocks sell off as yields rise, BTC follows suit in a risk-off trend, and the “Fed rate cut is coming” narrative that served as one of the cleanest macro catalysts for crypto until late 2025 no longer has a clear timeline to fall back on.
These four mechanisms operate long before a recession or full-blown credit event occurs. The bond market is enough to make borrowing more expensive, tighten financial conditions, reduce risk appetite and drive down speculative assets.
BTC’s trajectory from here will follow the 10-year US Treasury yield, and whether it retreats or rises from 4.69% will set a macro ceiling for risk appetite more specifically than any on-chain catalyst.
Where does the trading go from here?
In the bullish case, geopolitical uncertainty surrounding Iran fades, oil prices fall, and US Treasury yields retreat from recent highs.
The Fed has left its June rate hike forecast open without testing, with the probability of a CME rate hike falling below 40% and the 10-year rate hike retreating toward 4.4%.
In that version, Bitcoin re-establishes a late 2026 moderation narrative in which ETF inflows return, spot demand recovers, and interest rate trades restore the liquidity environment BTC was in.
| scenario | Macro settings | Key levels to focus on | Impact of Bitcoin |
|---|---|---|---|
| bull case | Iran risks fade, oil cools, Treasury yields retreat | In 2010, it will decline to 4.4%. Probability of rate hike is below 40% | BTC Rebuilds Moderation Story for Second Half of 2026 |
| basic case | Fed remains discretionary, but risk of rate hike remains | In 2010, it remained around 4.5% to 4.7%. CME rate hike remains likely | BTC remains volatile and macro sensitive |
| bear case | Waller’s hawkish stance will be maintained due to persistent inflation | After 10 years, it will be pushed back to more than 4.69%. | US Treasuries compete with BTC, weakening risk appetite |
| stress case | Yields rise even though the correlation between stocks and yields remains extremely negative | 30-year stays are around 5.2% or higher. Stock outflow continues | BTC trades as part of broader risk asset drawdown |
In the bear case, persistent inflation maintains Wallerian hawkishness across the FOMC, with one rate hike becoming the consensus base case and pushing the 10-year rate back towards above 4.69%.
In this version, BTC remains range-bound around current levels, US Treasuries continue to compete for capital with speculative assets, and the -0.70 correlation in equity yields acts as structural resistance.
Bitcoin’s next move will depend on whether U.S. Treasury yields can fall enough to give risk assets room to recover. With the 10-year bond at 4.69% and the 30-year bond at 5.201%, the bond market is already seeing the Fed tighten, and the market is pricing Bitcoin accordingly.
(Tag translation) Bitcoin
