Bond Yield Surge Pushes Bitcoin Below $77K as Rate Hike Bets Return

Bitcoin tumbled below $77,000 on May 19 as a relentless surge in U.S. Treasury yields rattled risk assets, reigniting fears that the Federal Reserve may be forced to hike rates again. The 30-year yield hit its highest level since July 2007, breaching 5.19%, while the 10-year note climbed to 4.687%—a level not seen since January 2025. The move came as traders abandoned bonds amid signs that inflation is reaccelerating, fueled by rising oil prices tied to geopolitical tensions.

According to CNBC, the 2-year Treasury note yield, which is sensitive to Fed policy expectations, rose 3 basis points to 4.12%. Jim Lacamp, senior vice president at Morgan Stanley Wealth Management, told CNBC's "Squawk on the Street" that "it looks like we're going to see a rate hike." This marks a sharp reversal from earlier this year when markets priced in multiple rate cuts.

Bitcoin tracked the macro headwinds, falling to $76,900 around the Wall Street open, according to data from TradingView. The cryptocurrency has been under pressure as higher yields make riskier assets less attractive. Ole S. Hansen of Saxo Bank noted on X that oil prices, inflation expectations, bond yields, and rate expectations were driving the market reaction.

Geopolitical risk added another layer of complexity. U.S. President Donald Trump posted on Truth Social that Gulf countries should prepare for a "full, large scale assault" on Iran if a deal is not reached. Traders typically associate such threats with higher oil prices and inflation, which further weigh on risk assets. Analyst Michaël van de Poppe commented on X that high bond yields and elevated oil prices form a "double headwind" for markets, adding that Bitcoin does not "look great" in the current environment.

The sell-off extended beyond cryptocurrencies. Gold dropped below $4,500, its lowest since late March, and silver also declined. The S&P 500 faced pressure as rising borrowing costs threaten to slow economic growth and compress equity valuations. Ian Lyngen, BMO's head of U.S. rates, warned that if the 30-year yield reaches 5.25%, a "more durable pullback" in equities could follow.

The bond market's message is clear: inflation is not vanquished, and the Fed may need to act. The combination of sticky core inflation, rising energy prices, and geopolitical uncertainty has upended the narrative of easing monetary policy. For Bitcoin, which has often been touted as a hedge against inflation, the current correlation with risk assets suggests it is behaving more as a high-beta technology play than a safe haven.

Investors now face a tricky environment where both bonds and equities are under pressure. The traditional 60/40 portfolio is suffering its worst year in decades, and cryptocurrencies offer no escape. The coming weeks will be critical as markets watch for any signs of de-escalation in the Middle East or a shift in Fed rhetoric. Until then, risk assets remain vulnerable to further declines.

Sources: CoinMarketCap, CNBC

1. Bitcoin fell below $77,000 as U.S. Treasury yields surged, with the 30-year yield hitting a 19-year high above 5.19%.
2. Traders now price in a potential Fed rate hike, reversing earlier expectations of cuts, as inflation concerns mount.
3. Geopolitical tensions with Iran and rising oil prices are adding to the inflationary pressure, further weighing on risk assets.
4. Gold and silver also declined, reflecting a broad-based sell-off in risk assets amid rising real yields.
5. Analysts warn that if the 30-year yield reaches 5.25%, equities could face a more significant pullback.