Treasury yields at 5% threaten extending Bitcoin’s best quarter since 2017

Treasury yields exceeding 5% pose a challenge to Bitcoin's continued success, as investors increasingly view riskier assets more favorably, according to Delphi Digital. In its latest report, Delphi noted Bitcoin's 43% gain during the third quarter, followed by a three-week upward trend. However, "the climb higher faces real resistance," the firm explained, citing the Federal Reserve's September rate increase and soaring Treasury yields.

Bitcoin has managed to surmount this hurdle, partly due to heightened interest in the "debasement trade," which posits that continuous government borrowing and money printing will erode the dollar's value. Despite Bitcoin briefly spiking above $87,000 last week, the asset has since retreated. Since August, Bitcoin has gained over 35%, following the US Treasury's decision to double its long-dated debt purchases to bolster market liquidity.

These measures have since been scaled up threefold. The interest rate environment surrounding Bitcoin may become less stringent if the US jobs data falls short of expectations, diminishing the likelihood of another Fed rate hike in October. September job growth was reported at 29,000, significantly below the anticipated 80,000, indicating a slowing labor market.

This news has augmented doubts about the Fed's readiness to raise rates further. Fed officials have already indicated their reluctance to act hastily, with New York Federal Reserve President John Williams stating that the central bank does not need to rush into another rate increase. Currently, the probability of an October hike stands at approximately 24%, down from over 75% a week ago.