Bitcoin’s Unexpected Tailwind: Why Rising Yields Might Be Bullish This Time

Rising bond yields have long been the bogeyman for Bitcoin and other risk assets. The logic is simple: higher yields on “risk-free” U.S. Treasuries make speculative investments less attractive. But the latest surge in yields tells a different story—one that could end up favoring Bitcoin.

Inflation Falls, But Yields Defy Gravity

U.S. inflation came in softer than expected on Tuesday. April’s Consumer Price Index rose just 0.2% for both the headline and core metrics, easing the annual headline figure to 2.3%—the lowest since early 2021.

In theory, weaker inflation should ease pressure on bond yields. Instead, the opposite happened. The 10-year Treasury yield jumped to 4.5%, its highest in over a month, and the 30-year yield climbed to 4.94%, nearing two-decade highs.

The disconnect suggests something deeper is at play than just inflation dynamics.

Traders Bet on Fiscal Fireworks

According to Spencer Hakimian of Tolou Capital Management, markets are pricing in a major fiscal push if Donald Trump returns to the White House.

“Yields climbing on a soft CPI print is a flashing red light for fiscal expansion,” Hakimian said on X. “Everyone’s spending big to win the midterms. Forget deficits—it’s rocket fuel for Bitcoin, gold, and stocks.”

Trump’s newly proposed tax plan, as reported by Bloomberg, calls for $4 trillion in cuts with only $1.5 trillion in offsetting spending reductions. That leaves a $2.5 trillion fiscal hole—one markets now seem to be baking in.

From Monetary to Fiscal Dominance

This pivot from monetary to fiscal drivers marks a potential regime shift. T. Rowe Price’s Arif Husain believes this fiscal reality will soon dominate bond markets.

“Fiscal expansion may support growth in the near term, but it’s also a massive weight on the Treasury market,” he warned, predicting that 10-year yields could reach 6% within 12 to 18 months.

Sovereign Risk Creeps In

Macro strategist EndGame Macro argues that what we’re really seeing is a repricing of U.S. sovereign risk. It’s no longer just about inflation—it’s about whether the U.S. can sustainably finance its debt.

“When yields rise even as inflation falls, it’s a sign the market is worried about the debt itself,” they wrote on X. That concern points toward “fiscal dominance,” where the government’s borrowing needs start to dictate financial conditions.

The cycle is self-reinforcing: higher yields mean higher debt costs, which require more issuance, which in turn pushes yields even higher.

What This Means for Bitcoin

Bitcoin, long pitched as a hedge against fiat instability and government excess, could thrive under these conditions. If investors start viewing U.S. debt as a growing liability, alternative stores of value—from BTC to gold—could catch a strong bid.

There’s also the prospect of the Federal Reserve stepping in with yield curve control—buying bonds to cap interest rates. If that happens, it would inject fresh liquidity into the system, indirectly boosting demand for risk assets like bitcoin.

In a world where fiscal policy drives the narrative and trust in sovereign debt begins to erode, Bitcoin may emerge not as the casualty of rising yields—but as one of its biggest winners.