Lately, the term ‘U.S. 10-year yield’ frequently pops up in conversations about Bitcoin. For many investors, it’s not entirely clear what it means or what its impact is on the crypto market. Yet, this yield says a lot about the health of the economy. When the economy cools down or overheats, risky investments like Bitcoin are often the first to feel it.
The falling 10-year yield is not a reassuring sign. In fact, it may point to problems under the hood. In this piece, we’ll explain step-by-step what this yield is and why you, as a crypto investor, should pay attention to it.
What is the U.S. 10-Year Treasury Yield? #
The U.S. government constantly borrows money by issuing debt securities, known as government bonds. The 10-year note in the United States is a prime example. It’s a bond with a ten-year maturity, also known in English as the 10-year ‘Treasury yield’.
Investors consider this yield almost risk-free because the probability of the U.S. government defaulting is very small. Therefore, banks and investors use this yield as a benchmark to determine other interest rates. Think of mortgage rates and the costs for business loans.
The 10-year yield reflects market sentiment and whether people are fearful or confident. When many investors seek safety, they buy these bonds en masse. This pushes the price up and the yield down. The exact opposite can also happen. When the yield is low and investors take more risk, they sell bonds. This causes the price to fall and the yield to rise.
Why is this important for crypto? #
For Bitcoin and other cryptocurrencies, two factors are key: how much money is circulating in the system and investors’ appetite for risk. If the 10-year yield falls because the economy is cooling and investors fear a recession, many parties will first pull money out of risky investments like crypto.
This can put additional pressure on the Bitcoin price in the short term. After all, investors are reducing their positions and holding more cash or safe bonds. That’s why a falling yield currently feels more like a warning than a celebration. It indicates that the bond market is pricing in a weaker economy. This means investors expect economic growth to decline. As a result, bond yields often fall as investors search for safe alternatives.
Sometimes Beneficial for Bitcoin #
However, there’s one important caveat: in the longer term, that same lower yield can actually help Bitcoin. If central banks want to support the economy, they often make borrowing cheaper. This typically brings more liquidity into the financial system. In such an environment, investors look for opportunities to increase their returns.
In their search for yield, investors turn to alternative assets like Bitcoin. This increases investment in crypto, especially when their confidence in official figures and policy is under pressure.
The U.S. 10-year yield doesn’t tell you what Bitcoin will do tomorrow, but it does reveal the economic climate in which the cryptocurrency must perform. That’s precisely why it’s important to keep an eye on this yield. Because it largely determines the financial game in which investors participate.