The US 10-year financial yield is below 4% for the first time since October.
This indicates a potential change in the Federal Reserve policy, sparking new interest in Bitcoin (BTC) and other risky assets.
Treasury yields and Bitcoin: Risk-on-Rotation?
As highlighted by the Financial Markets Aggregator BarChart, this decline reflects an increasing number of economic uncertainties. Specifically, it suggests a growing fear of a recession and an increase in speculation that the Fed may pivot to assess cuts earlier than expected.
The US 10-year-old Treasury Department is below 4%. Source: x’s bar chart
The fall in the Treasury has reduced the appeal of traditional safe seafarer assets like bonds, and in many cases encourage investors to seek higher returns elsewhere.
Historically, Bitcoin and altcoin have benefited from such a shift. This is because actual declines in yields increase liquidity and risk appetite. Crypto analyst Dan Gambardello highlighted this connection. He said lower yields were bullish for Bitcoin, adjusting it to expectations that the stupid Fed would drive liquidity into riskier assets.
“Ironically, when yields drop, there are fewer reasons to sit on ‘safe’ bonds, and ultimately more reasons to chase risky assets like BTC and Alt. This is why we see risk ombres get excited when their 10-year yields begin to drop,” he said.
Additionally, Bitmex founder and former CEO Arthur Hayes noted that the Treasury yields fell sharply in two years after the introduction of new tariffs. He said this strengthened the market’s expectations for an imminent Fed rate cut.
“We need to ease supply as the two-year Treasury yield was dumped after the tariff announcement, as the market is saying it will cut quickly and perhaps QE will restart QE to counter the economic impact,” Hayes shares on X (Twitter).
Hayes previously predicted that Bitcoin could reach $250,000 if quantitative easing (QE) returns in response to the recession.
Trump’s Factors: Tariffs and Market Volatility
Additionally, analysts have linked yields to the economic uncertainty caused by Trump’s aggressive tariff strategy. As Gambardello pointed out, these tariffs encouraged flights to safety, increased bond prices and reduced yields.
This trend is consistent with Trump’s broader economic approach to weakening interest rates that historically benefit Bitcoin. During his first term, Trump often wanted lower dollars and lower interest rates to promote exports and economic growth. He also pressured the Fed to cut fees multiple times.
Another analyst, Kristoffer Kepin, highlighted the growth of M2 money supply. This further enhances the liquidity to enter the market. This inflow of capital could flow to Bitcoin and altcoin as investors are seeking valued alternatives amidst economic turbulence.
Despite the potential benefits of Bitcoin, Goldman Sachs recommends gold and the Japanese Yen as a favorable hedge against the risk of a US recession. Specifically, banks cited historic performance in risk-off environments.
“Yen will provide investors with the best currency hedges when the US recession is likely to increase,” Bloomberg reported, citing Kamakshatrividi, head of Goldman Sachs’ global forex, interest rates and emerging market strategies.
The bank expressed the same sentiment towards gold, raising expectations that investors would buy yellow metal. Similarly, a Bank of America (BOFA) survey showed that 58% of fund managers prefer gold as a trade war heaven, while Bitcoin is only 3%.
Meanwhile, JPMorgan has increased the probability of a global recession to 60%. Similarly, multinational banks and financial services companies attribute it to an increased risk of economic shock from tariffs announced on the day of release.
“These policies are likely to push the US and perhaps the global economy into a recession this year if they persist,” Bruce Kassman, head of World Economic Research, wrote in a note late Thursday.
However, Kassman acknowledged that a scenario in which the rest of the world is disrupted through the US recession is possible, but less likely than a global recession.
As Treasury yields continue to fall and economic uncertainty increases, the Fed becomes an important clock for investors on signs of policy change.
If rate reductions and liquidity injections are achieved, Bitcoin can earn a significant profit, especially as traditional assets are repricing. However, as experts note, amidst these market changes, short-term volatility remains a significant risk factor.
Bitcoin (BTC) price performance. Source: Beincrypto
Beincrypto data shows that Bitcoin has traded at $82,993 at the time of this writing, trading at a modest 1.42% over the last 24 hours.
