Stubborn U.S. 10-Year Yield Defies Fed Rate Cut Hopes, Testing Bitcoin Bull Thesis

A defiant bond market is challenging a core pillar of the cryptocurrency bull case, as resilient Treasury yields and a strong dollar refuse to follow the expected script despite looming Federal Reserve rate cuts.

Introduction: A Crucial Macroeconomic Puzzle Emerges

As of December 2, 2025, a significant macroeconomic divergence is unfolding, presenting a direct challenge to one of the foundational narratives supporting the current Bitcoin bull market. Bitcoin bulls have largely anchored their optimistic thesis on a specific sequence of events: Federal Reserve rate cuts leading to lower U.S. Treasury bond yields and a weaker U.S. dollar, thereby creating a fertile environment for risk assets like cryptocurrencies. However, real-time data from the bond and currency markets is telling a starkly different story. Despite clear expectations for the Fed to continue its easing cycle with a 25 basis point cut on December 10, bringing the target range to 3.5%-3.75%, the yield on the benchmark 10-year U.S. Treasury note remains stubbornly above 4%. Even more concerning for the bullish narrative is that this yield has actually increased by 50 basis points since the Fed initiated its rate-cutting cycle in mid-September 2024. Simultaneously, the U.S. Dollar Index (DXY) has shown resilience, bouncing from lows near 96.000 in September and testing the 100.00 level. This collective resilience in traditional safe-haven assets suggests that the old playbook linking Fed dovishness directly to crypto strength may be breaking down, forcing market participants to re-evaluate their assumptions.

The Fed's Dovish Pivot Meets a Bond Market Rebellion

The Federal Reserve's anticipated policy path appears clear. After beginning its easing cycle in September 2024, the central bank is expected to deliver another rate cut in December 2025. Several major investment banks, including Goldman Sachs, project that rates could fall to as low as 3% in the coming year. Historically, such a dovish pivot has been a powerful catalyst for cryptocurrency markets. Lower benchmark interest rates reduce the opportunity cost of holding non-yielding assets like Bitcoin and diminish the appeal of yield-bearing government bonds. They also typically signal a looser monetary environment with higher liquidity, which often flows into speculative assets.

Yet, the bond market is not cooperating with this historical precedent. The yield on the 10-year Treasury note, a global benchmark for borrowing costs and risk sentiment, has not declined in tandem with rate cut expectations. Instead, it has moved inversely, rising since the easing cycle began. This stickiness in yields points to forces overpowering the traditional influence of central bank policy. Analysts cite ongoing concerns over expansive U.S. fiscal debt and the abundant supply of new Treasury bonds hitting the market as primary factors. Furthermore, persistent underlying inflation worries are preventing a sustained decline in long-term yield expectations. The market is effectively signaling that while the Fed may control short-term rates, long-term yields are being dictated by fiscal policy and inflation psychology.

The Dollar's Unexpected Resilience in a Dovish Climate

Parallel to the bond market's defiance, the U.S. dollar has exhibited notable strength contrary to typical post-rate-cut behavior. The U.S. Dollar Index, which tracks the greenback against a basket of major fiat currencies, saw a downtrend that began in April 2025 stall near the 96.000 level in September. It has since recovered, repeatedly testing the 100.00 threshold.

This resilience suggests several shifting dynamics. First, market expectations for Fed easing may already be fully "priced in," meaning the actual event of a rate cut no longer provides fresh downward pressure on the currency. Second, and perhaps more critically, the relative strength of the U.S. economy compared to other major economies continues to support demand for dollars. Even as the Fed eases policy, if other central banks are perceived as being on a similar or more aggressive path—or if their economies are weaker—the dollar can maintain or even gain strength. A strong dollar historically creates headwinds for Bitcoin and other cryptocurrencies, as it increases the local-currency cost of acquisition for international investors and can reflect a broader risk-off sentiment where capital seeks traditional safe havens.

The Global Rate Ripple Effect: Japan's Role Reverses

Adding another layer of complexity to the global yield environment is a significant policy shift from Japan. For over a decade, ultra-low yields on Japanese Government Bonds (JGBs) during the 2010s and through the COVID-19 pandemic acted as an anchor, suppressing borrowing costs worldwide by offering investors few attractive alternatives outside their domestic market.

This dynamic is now reversing. Renewed expectations for a Bank of Japan (BOJ) rate hike and the subsequent rise in JGB yields are removing this global anchor and exerting upward pressure on sovereign bond yields in other advanced economies, including the United States. As Japanese yields become more attractive, capital that once flowed globally in search of returns may repatriate, tightening financial conditions elsewhere. This represents a fundamental change in the international monetary landscape that directly impacts the calculus for all risk assets, including Bitcoin, by raising the baseline cost of capital globally.

Historical Context: When Old Playbooks Break Down

To understand the potential significance of this divergence, it is useful to consider historical correlations. During previous cycles of monetary easing—particularly in the post-2008 era and following the March 2020 COVID crash—liquidity injections and lower yields frequently coincided with major bull runs in Bitcoin. The narrative of Bitcoin as "digital gold" and an inflation hedge flourished in an environment of zero interest rates and quantitative easing.

The current test is different. The Fed is cutting rates from a significantly higher level (above 5% in early 2024) amid persistent inflation concerns and record government debt issuance. The environment is not one of emergency stimulus but of a cautious normalization from restrictive policy, set against a backdrop of substantial fiscal expansion. This combination—moderate Fed easing coupled with heavy Treasury supply—is creating a scenario where long-term yields decouple from short-term policy rates, breaking the straightforward "lower rates = higher crypto prices" model that dominated much of the past decade.

Broader Crypto Market Implications and Parallel Developments

While Bitcoin's macro thesis faces this test, other segments of the cryptocurrency ecosystem continue to evolve based on their own fundamentals. For instance, security infrastructure remains a critical growth area. Data from October 2025 shows that GoPlus Security generated $4.7 million in total revenue across its product lines, with its primary GoPlus App contributing approximately $2.5 million (53%) and its SafeToken Protocol adding $1.7 million.

Furthermore, demand for security tools remains robust; GoPlus Intelligence's Token Security API averaged 717 million monthly calls year-to-date in 2025, peaking at nearly 1 billion calls in February 2025. Since its January 2025 launch, its native $GPS token has registered over $5 billion in total spot volume and $10 billion in derivatives volume for the year.

In parallel, foundational elements of crypto markets face ongoing scrutiny regardless of macro conditions. The stability of major stablecoins like Tether (USDT) remains a perennial topic of debate among market participants, with discussions frequently focusing on asset backing composition and liquidity preparedness for large-scale redemptions.

Strategic Conclusion: Navigating a New Macro Regime

The persistent strength in U.S. Treasury yields and the dollar index represents more than short-term noise; it signals a potential regime shift in market behavior that directly tests a core assumption behind Bitcoin's current bull thesis. The simplistic correlation between Fed dovishness and crypto strength appears to be fracturing under the weight of fiscal realities, global central bank dynamics, and entrenched inflation concerns.

For professional crypto market participants and observers, this necessitates a more nuanced analytical framework moving forward:

1. Watch Real Yields: Focus less on headline Fed funds rate moves and more on real (inflation-adjusted) yields on Treasuries and their global counterparts like JGBs.
2. Monitor Fiscal Signals: Treasury issuance calendars and debt ceiling debates will increasingly impact long-term yield trajectories as much as monetary policy.
3. Assess Relative Strength: The dollar's path will be dictated by comparative economic growth and policy divergence between the U.S., Europe, Japan, and China.
4. Evaluate Internal Catalysts: In an environment where traditional macro tailwinds may weaken, Bitcoin's performance may rely more heavily on internal ecosystem catalysts such as adoption metrics (e.g., active addresses), institutional product inflows (e.g., ETF volumes), and technological developments like protocol upgrades.

The takeaway is not necessarily bearish for Bitcoin but calls for heightened vigilance. The market is entering a phase where traditional indicators may provide conflicting signals or lose predictive power altogether—a scenario that demands deeper analysis beyond conventional macro plays.

AI Disclaimer: Parts of this article were generated with assistance from AI tools and reviewed by an editorial team to ensure accuracy and adherence to professional standards.