The US 10-year Treasury yield has fallen below 4% for the first time since October.
This signals a potential shift in Federal Reserve (Fed) policy, sparking renewed interest in Bitcoin (BTC) and other risk assets.
Treasury Yields and Bitcoin: A Risk-On Rotation?
As highlighted by financial markets aggregator Barchart, this decline reflects growing economic uncertainty. Specifically, it suggests rising recession fears and increasing speculation that the Fed may pivot to rate cuts sooner than expected.
US 10-Year Treasury drops below 4%. Source: Barchart on X
A drop in Treasury yields reduces the attractiveness of traditional safe-haven assets like bonds, often encouraging investors to seek higher returns elsewhere.
Historically, Bitcoin and altcoins have benefitted from such shifts, as declining real yields increase liquidity and risk appetite. Crypto analyst Dan Gambardello emphasized this connection. He noted that lower yields are bullish for Bitcoin, aligning with expectations that a dovish Fed will drive liquidity into riskier assets.
“The irony is that when yields fall, there’s less reason to sit in “safe” bonds— And ultimately more reason to chase returns in risk assets like BTC and alts. This is why you see risk-on bulls get excited when 10-year yields begin falling,” he stated.
Additionally, BitMEX founder and former CEO Arthur Hayes pointed out that the 2-year Treasury yield sharply declined after the new tariffs were introduced. He said this reinforced the market’s expectation of imminent Fed rate cuts.
“We need Fed easing, the 2yr treasury yield dumped after Tariff announcement because the market is telling us the Fed will be cutting soon and possibly restarting QE to counter -ve economic impact,” Hayes shared on X (Twitter).
Hayes previously projected that Bitcoin could surge as high as $250,000 if quantitative easing (QE) returns in response to economic downturns.
The Trump Factor: Tariffs and Market Volatility
Further, analysts have tied the yield drop to economic uncertainty triggered by Trump’s aggressive tariff strategy. As Gambardello noted, these tariffs have spurred a flight to safety, pushing bond prices higher and lowering yields.
This trend aligns with Trump’s broader economic approach of weakening the dollar and lowering interest rates, which historically benefit Bitcoin. During his first term, Trump frequently desired a weaker dollar and lower interest rates to boost exports and economic growth. He also pressured the Fed to cut rates multiple times.
Another analyst, Kristoffer Kepin, highlighted that the M2 money supply is growing. This reinforces expectations of increased liquidity entering the market further. This influx of capital could flow into Bitcoin and altcoins as investors seek alternative stores of value amid economic turbulence.
Despite Bitcoin’s potential upside, Goldman Sachs has recommended gold and the Japanese yen as preferred hedges against US recession risks. Specifically, the bank cited its historical performance in risk-off environments.
“The yen offers investors the best currency hedge should the chances of a US recession increase,” Bloomberg reported, citing Kamakshya Trivedi, head of global foreign exchange, interest rates, and emerging market strategy at Goldman Sachs.
The bank expressed the same sentiment toward gold, raising its forecast as investors buy the yellow metal. Similarly, a Bank of America (BofA) survey showed that 58% of fund managers prefer gold as a trade war haven, while only 3% back Bitcoin.
Meanwhile, JPMorgan has raised its global recession probability to 60%. Likewise, the multinational banking and financial services company attributed the increased risk to the economic shock from tariffs announced on Liberation Day.
“These policies, if sustained, would likely push the US and possibly global economy into recession this year,” wrote head of global economic research Bruce Kasman in a note late Thursday.
However, Kasman acknowledged that while a scenario where the rest of the world muddles through a US recession is possible, it is less likely than a global downturn.
As Treasury yields continue to fall and economic uncertainty mounts, the Fed becomes a key watch for investors for signs of a policy shift.
If rate cuts and liquidity injections materialize, Bitcoin could see substantial gains, particularly as traditional assets undergo re-pricing. However, as experts caution, short-term volatility remains a key risk factor amidst these market shifts.
Bitcoin (BTC) Price Performance. Source: BeInCrypto
BeInCrypto data shows Bitcoin was trading for $82,993 as of this writing, up by a modest 1.42% in the last 24 hours.
