The prospect of the 10-year Treasury yield reaching 6% does not necessarily mean bitcoin will face the same pressure seen during the 2022 rate-hike cycle. Analysts say the key factor is why yields are rising.

The 10-year Treasury yield has climbed steadily for months, pushing up borrowing costs across the U.S. economy. Some analysts now see the benchmark yield reaching 6%, a level last reached in 2000.

Higher yields can weigh on assets such as bitcoin and gold because neither produces conventional cash flow or an embedded yield. But the market impact can vary significantly depending on whether the increase comes from Federal Reserve policy, economic growth or concerns about government finances.

A rise driven by investors demanding greater compensation for holding U.S. debt because of persistent deficits would carry a different implication from a move caused by renewed Fed tightening. In the fiscal-risk scenario, higher yields could indicate greater concern about U.S. debt and borrowing, while potentially supporting assets that are viewed as alternatives to traditional financial markets.

Recent CoinDesk analysis found that bitcoin has generally had limited correlation with Treasury yields over longer periods.

“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, wrote in a Tuesday client note. He expects the 10-year Treasury yield to reach 6% in the coming months.

What Happened During the 2022 Rate Cycle

The experience of 2022 shows how strongly bitcoin can react when rising yields are accompanied by monetary tightening.

The 10-year Treasury yield more than doubled to 3.88% that year as the Federal Reserve rapidly increased interest rates to fight inflation. The tightening cycle included several 50- and 75-basis-point hikes.

Bitcoin declined 64% in 2022, with higher yields and tighter financial conditions adding to the damage caused by crypto industry failures and scams.

Since the end of 2023, however, bitcoin has behaved differently even as Treasury yields have continued to rise.

The 10-year yield has increased 135 basis points since the end of 2023, reaching 5.23%, its highest level since 2007. Bitcoin has roughly doubled over the same period to $86,000, although it remains below its October record above $126,000.

Thielen and other analysts have attributed the recent rise in yields largely to fiscal concerns and an increasing term premium. Investors are seeking higher returns for lending money to the U.S. government over longer periods because of uncertainty surrounding inflation, deficits and future borrowing.

Strategic Analytics has made a similar observation about gold. The Chicago-based firm said the metal has increasingly reflected fiscal-risk expectations rather than simply tracking the Federal Reserve’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,” the firm said in a recent LinkedIn post.

Why Analysts Are Watching 6%

The case for a 6% Treasury yield is largely tied to the U.S. government’s debt burden and strong nominal economic growth.

Thielen highlighted the gap between the current Treasury yield, nominal GDP growth and the pace of federal debt expansion. The 10-year yield stands at 5.24%, compared with nominal GDP growth of 6.56%. Federal debt, meanwhile, has grown by roughly 8.5% annually since 2020.

“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, also cited 6% as a possible upside level for the 10-year yield during an appearance on CNBC.

Niles pointed to federal deficits of about 6% of GDP and highlighted competition for capital from large AI-focused technology companies, or hyperscalers, that are raising significant amounts of debt.

The U.S. government is issuing bonds to finance persistent deficits while major technology companies are also tapping debt markets to fund expansion. Greater competition for capital can increase borrowing costs and put additional pressure on Treasury yields.

For bitcoin, the important distinction is what drives the move. A renewed cycle of rapid Fed rate hikes could recreate the conditions that hurt bitcoin in 2022, while a yield increase driven primarily by fiscal concerns and the term premium would represent a different market backdrop.