Bitcoin faces rising Treasury yields as CoinShares warns bond markets could matter more than Fed rates amid slowing crypto fund inflows.
Bitcoin’s next price move may depend more on the U.S. bond market than the Federal Reserve’s interest rate decisions. CoinShares believes rising Treasury yields could become a major factor as investors grow concerned about government debt and borrowing costs.
In its October 8 market update, CoinShares reported that digital asset funds had attracted roughly $11.1 billion since mid-July. However, inflows slowed this week as the 10-year U.S. Treasury yield climbed above 5.3%. The 30-year yield also reached 5.7%, putting borrowing costs near their highest levels in decades.
The concern is no longer limited to whether the Fed will raise interest rates again. Investors are also watching why Treasury yields keep rising, even as recent economic data points to slower growth.
Why Treasury Yields Matter for Bitcoin
Higher Treasury yields can put pressure on Bitcoin because government bonds offer returns with lower risk. They also make borrowing more expensive, which can leave less money available for investments in cryptocurrencies.
However, the effect on Bitcoin may change depending on what is pushing yields higher.
CoinShares sees another possibility if rising yields reflect worries about the U.S. government’s ability to manage its debt. James Butterfill, Head of Research at CoinShares, has examined how monetary conditions and investment flows affect Bitcoin.
The firm’s analysis suggests debt concerns could encourage investors to consider Bitcoin instead of traditional government-issued currencies.
For now, the fund flow figures tell a different story. Digital asset funds have attracted billions since July, but fresh inflows have slowed as Treasury yields remain elevated. CoinShares is watching whether demand returns as investors weigh the risks facing government bonds.
Read also: Bitcoin, Ethereum and XRP Flash Buy Signals After Major Sell-Off
Bond Market Pressures the Fed
Rising yields have also brought the Federal Reserve’s policy decisions under closer scrutiny.
Market analyst James E. Thorne argued that investors are demanding higher returns because they have lost confidence in the Fed’s approach. He cited San Francisco Fed research linking roughly two-thirds of the recent 10-year yield increase to the term premium.
The Bond Market Is Losing Faith in the Fed the Term Premium says so.
When will the Fed become competent?
The rising Treasury term premium is a confidence problem. Investors are demanding more compensation to hold long-term bonds because they do not trust the Federal Reserve to… https://t.co/d7dSd8Zh4j pic.twitter.com/UksGt496Z9
— James E. Thorne (@DrJStrategy) October 9, 2026
The term premium is the extra return investors demand for holding longer-term government bonds. Thorne believes the increase reflects concerns that the Fed could keep interest rates too high for too long. He questioned whether policymakers were responding quickly enough to signs of easing inflation.
To support his argument, Thorne cited the Dallas Fed trimmed mean PCE inflation of 2.2%. He also pointed to longer-term inflation expectations near 2.3%, suggesting investors were not preparing for a sharp inflation increase.
Meanwhile, CoinShares reported that the estimated probability of an October rate increase fell from 71% to 23% after weaker employment data.
Fed Treasury Purchases and Bitcoin Liquidity
The New York Fed’s planned Treasury bill purchases have added another factor for Bitcoin investors to watch.
Crypto analyst Martini Guy reported that the central bank planned to purchase $3.891 billion in Treasury bills on October 9. The operation has drawn attention to whether additional liquidity could support Bitcoin and other risk assets.
JUST IN: 🇺🇸 The New York Fed is set to purchase $3.891B of US Treasury bills today.
That adds liquidity to the financial system, although this is a Treasury bill purchase operation rather than a new round of QE.
For Bitcoin, additional liquidity can be supportive for risk… pic.twitter.com/LNeJGJVDJa
— That Martini Guy ₿ (@MartiniGuyYT) October 9, 2026
Treasury purchases can add liquidity to financial markets, although routine operations differ from quantitative easing.
More liquidity can encourage investment in cryptocurrencies when traders have funds available and are willing to take risks. However, such purchases do not guarantee increased Bitcoin demand.
Martini Guy said the key question is whether the operation improves market liquidity and encourages Bitcoin buying. CoinShares is also watching digital asset fund flows for signs of renewed interest from institutional investors.
Both measures could help explain how Bitcoin responds as Treasury yields remain high.
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