Why Are Bond Yields Rising and How Does it Affect Bitcoin's Price

Between 2024 and 2025, bond yields in the U.S. and Japan have jumped to highs not seen in years, shaking up global markets. A mix of sticky inflation, tighter central bank policies, and worries about government debt have pushed investors to ask for better returns on bonds. These shifts are having a knock-on effect across markets—including on Bitcoin. In this article, we take a look at what’s driving bond yields higher and how that’s impacting crypto’s biggest asset.

Why Are US Bond Yields Rising

U.S. bond yields surged to multi-year highs in 2024 and 2025, driven by persistent inflation, tight monetary policy, and a deteriorating fiscal outlook. Although the Federal Reserve began modest rate cuts in late 2024, long-term Treasury yields continued to rise, reflecting ongoing concerns about inflation and fiscal sustainability.

One of the key factors behind the rise is entrenched inflation expectations. Core inflation remained well above the Fed's 2% target into 2024, with strong wage growth and consumer demand keeping price pressures elevated. As a result, investors will demand higher yields to offset the erosion of real returns caused by inflation.

Another major driver is hawkish central bank policy. The Federal Reserve, having aggressively raised interest rates from near zero to around 5% since 2022, signaled a "higher-for-longer" stance throughout much of 2024. Even as it started cutting rates later that year, markets remained skeptical of a swift dovish pivot, and yields on the 10- and 30-year Treasuries continued to climb.

Compounding these pressures is the ballooning federal deficit. U.S. government borrowing needs surged due to increased spending and limited tax reforms. By 2025, Treasury auctions were absorbing enormous volumes of debt issuance, and investors began to question how sustainable such borrowing would be. When Moody's downgraded U.S. government debt in May 2025, citing an unsustainable fiscal path, the 30-year Treasury yield rose above 5%.

Finally, with global investors less willing to absorb U.S. debt and the Fed no longer acting as a major buyer through quantitative easing, the supply-demand balance shifted unfavorably. This forced yields higher as the government had to offer greater returns to attract capital.

Why Are Japanese Bond Yields Rising

Japan, long associated with ultra-low or even negative bond yields, has seen its sovereign yields rise to multi-decade highs as the Bank of Japan (BoJ) gradually shifts its monetary stance. The change reflects both internal pressures and the global yield repricing.

In 2024 and 2025, the BoJ relaxed its yield-curve control (YCC) policy, which had previously capped 10-year Japanese Government Bond (JGB) yields near zero. Facing rising inflation for the first time in decades, the BoJ began allowing more flexibility in JGB yields, which quickly responded by climbing toward levels not seen since the early 2000s.

Several factors contributed to this shift. Inflation in Japan, while still modest compared to the U.S., had persistently exceeded the BoJ's 2% target, with energy and wage costs rising. Meanwhile, Japan’s massive debt burden and fiscal spending plans raised investor concerns, pushing yields higher as risk premiums expanded.

Globally, Japanese investors also began to reassess the relative appeal of foreign versus domestic bonds. With yields abroad (especially in the U.S. and Europe) becoming more attractive, Japanese capital that once flowed overseas started to repatriate. This added upward pressure on JGB yields as domestic investors demanded better returns at home.

Moreover, as central banks worldwide moved away from ultra-loose monetary policy, Japan was under pressure to follow suit. The result was a synchronized global yield rise, in which Japan could no longer remain an outlier without risking capital flight or excessive currency depreciation.

How Do Rising Bond Yields Affect Bitcoin’s Price

Rising bond yields—especially those of U.S. Treasuries—have a significant influence on Bitcoin’s price, although the relationship is nuanced and context-dependent.

Generally, higher yields represent a headwind for Bitcoin and other risk assets. When government bonds offer attractive risk-free returns (e.g., 4–5% or more), investors are less incentivized to hold speculative, volatile assets like Bitcoin, which pays no yield. When interest rates and yields are high, the opportunity cost of holding Bitcoin rises, which results in capital often shifting toward relatively safer instruments.

During 2024–2025, this trend was evident. Whenever bond yields spiked on strong economic data or inflation surprises, Bitcoin often sold off alongside equities. For instance, in early 2025, strong U.S. labor and PMI data caused Treasury yields to surge, dimming hopes of aggressive Fed cuts. Bitcoin responded with a sharp pullback of ~10%, as investors moved into cash and short-term bonds.

Moreover, rising yields often coincide with a strengthening U.S. dollar, another factor that puts downward pressure on Bitcoin. A stronger dollar makes dollar-denominated assets more appealing and tightens global liquidity conditions, leading investors to reduce exposure to higher-risk instruments.

However, the relationship isn’t always one-directional. In certain cases, rising yields have coincided with Bitcoin rallies—especially when the yield surge reflects fiscal stress or weakening confidence in fiat currencies. In late 2024 and again in May 2025, Bitcoin hit new all-time highs even as the 10-year and 30-year Treasury yields were at their highest in over 15 years. These rallies were interpreted by some as a sign of investors turning to Bitcoin as an alternative store of value, particularly when U.S. fiscal credibility was questioned.

For example, during a poorly received U.S. bond auction in May 2025, Treasury yields jumped above 5.1%, but Bitcoin rallied past $111,000, suggesting some capital might have rotated toward Bitcoin as a hedge against government dysfunction.

Ultimately, rising yields are a double-edged sword for Bitcoin. When driven by healthy economic growth and tight monetary policy, they tend to hurt Bitcoin by raising the opportunity cost of holding it. But when yields rise due to inflation fears, debt sustainability concerns, or loss of confidence in traditional assets, Bitcoin can benefit as a non-sovereign alternative. As such, the direction of Bitcoin’s price in a high-yield environment depends on the broader narrative driving those yields.

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