Analysts see 10-year Treasury yield hitting 6%. Bitcoin bulls shouldn’t panic

The 10-year Treasury yield, which affects borrowing costs across the U.S. economy, has been rising for months, and some analysts now think it’s headed to 6%, a level last seen in 2000.

That might sound like bad news for bitcoin BTC$84,117.13. Not necessarily.

The effect on bitcoin and on assets like gold, which have no cash flow or built-in yield, depends on what is driving yields higher.

If investors want higher yields because they’re worried about record deficits, rather than a booming economy or Fed rate hikes, that’s a vote of no confidence in U.S. government finances. That’s the bull case for alternatives like bitcoin, which over the long term has been largely uncorrelated with yields, a recent CoinDesk analysis showed.

“When yields rise because the Fed is tightening, bitcoin suffers. When yields rise on fiscal and term-premium concerns, the picture flips,” Markus Thielen, founder of 10x Research, said in a note to clients Tuesday, forecasting a rise in the 10-year yield to 6% in the coming months.

Market action since 2022 backs Thielen’s take. The 10-year yield more than doubled to 3.88% that year as the Fed raised interest rates rapidly, including several 50- and 75-basis-point hikes to fight inflation.

Bitcoin fell 64% that year. Fed tightening and rising yields added to the pain from crypto scams and blowups.

The picture has been different since. From the end of 2023, the 10-year yield has risen 135 basis points to 5.23%, the highest since 2007. Over the same stretch, bitcoin has roughly doubled to $86,000, even after pulling back from its October record above $126,000.

Thielen and others attribute much of the recent rise in yields to fiscal fears and a higher term premium. In plain English, investors want to be paid more to lock up their money in long-term bonds, given the uncertainty over inflation and government borrowing.

Chicago-based Strategic Analytics made a similar point about gold, noting that it has tracked fiscal risk more closely than the Fed’s policy path since 2022.

“Since 2022, gold has increasingly tracked fiscal-risk perceptions – term premium, deficits, debt sustainability – rather than the Fed’s policy path. Gold is not defying real yields. It is pricing fiscal sustainability and currency debasement, which has become the marginal driver,” it said recently in a LinkedIn post.

Forecasts of a 6% 10-year yield rest mainly on debt concerns and strong nominal growth, meaning growth not adjusted for inflation.

“The key point is that yields still sit well below nominal GDP growth (5.24% vs 6.56%), and far below the roughly 8.5% annual growth of federal debt since 2020, so bondholders are not yet being compensated for the pace at which the nominal economy and the debt stock are expanding,” Thielen said.

Dan Niles, founder of Niles Investment Management, named 6% as a plausible upside level for the 10-year yield during a CNBC appearance.

He pointed to deficits running at roughly 6% of GDP, and to hyperscalers now competing directly with the Treasury to raise money in debt markets.

Put simply, the government keeps selling bonds to fund large, persistent deficits, while big AI-focused tech companies are raising huge sums in the same markets. That competition for the same pool of capital can push yields higher and make borrowing more expensive for everyone.

The caveat for bitcoin bulls is that if yields climb because the Fed starts raising rates rapidly again, the 2022 playbook applies.