Cryptocurrency markets experienced a robust rally in the final months of 2024, largely untouched by the global rise in interest rates, but that trend may be shifting as bond yields continue to climb.

While crypto assets surged during the last quarter of the year, the growing momentum in government bond yields across the globe is now posing a significant challenge to the market’s bullish trajectory.

The U.S. 10-year Treasury yield, which serves as a key global benchmark, reached 4.70% on Wednesday, nearing its highest level in years. This marks an increase of more than 100 basis points since the Federal Reserve initiated its rate cuts in September. Meanwhile, in the U.K., the 30-year Gilt yield jumped to 5.35%, its highest point since 1998, and has risen by 105 basis points since the Fed’s rate cuts.

Other major economies, including Germany, Italy, and Japan, have also seen sharp increases in bond yields. Japan’s 10-year JGB yield, while still relatively low at 1.18%, has reached its highest level in nearly 15 years.

For the most part, rising bond yields didn’t seem to impact cryptocurrency prices, with Bitcoin and many altcoins hitting record or multi-year highs in mid-December. However, since then, the momentum has waned, with Bitcoin falling more than 10% from its peak above $108,000 just weeks ago, and several other major cryptocurrencies seeing even larger declines.

One notable exception to this trend is China, where yields are actually falling in response to deflation concerns. As reported by The Kobeissi Letter, China is currently experiencing its longest period of deflation since 1999, which has contributed to the drop in yields.