Bitcoin Rally Faces Pressure as Treasury Yields Rise Above 5%

Bitcoin’s strong third quarter performance is facing a tougher test as US Treasury yields climb above 5%, giving investors a higher-return alternative to riskier assets.

Bitcoin’s Best Quarter Since 2017 Faces a New Test

Bitcoin gained about 43% in the third quarter, its strongest quarterly performance since 2017, and continued higher for a third consecutive week.

The rise has also been supported by growing interest in the debasement trade, as investors focus on large government deficits, expanding debt and rising interest costs.

Treasury Yields Raise the Bar for Risk Assets

Yields above 5% could make investors more selective. When government bonds offer relatively high returns with lower risk, assets such as Bitcoin need stronger reasons to attract capital.

Bitcoin has gained more than 35% since mid-August, following plans to increase longer-term Treasury buybacks. Those purchases have since risen to three times their previous level.

Weak Jobs Data Eases October Rate Concerns

US employers added only 29,000 jobs in September, compared with forecasts of 80,000. The weaker report reduced expectations for another Federal Reserve rate increase in October.

The probability of an October hike has fallen to around 24%, from above 75% a week earlier. Fed officials have also indicated that there is no immediate need to rush into another increase.

For Bitcoin, softer employment data could provide short-term support. However, persistently high Treasury yields remain a major obstacle to extending the rally.