Treasury yields at 5% threaten extending Bitcoin’s best quarter since 2017

Bitcoin delivered its strongest third-quarter performance since 2017, rising about 43% over the period and recording a third straight weekly gain, according to market research firm Delphi Digital. The token briefly climbed above $87,000 last week and has advanced more than 35% since mid-August, when the US Treasury announced plans to expand long-dated debt buybacks aimed at supporting market liquidity.

Despite the recent rally, Delphi Digital cautioned that further gains may face headwinds as nominal US Treasury yields have climbed past 5%, creating a higher bar for risk assets. The firm noted that when government bonds offer yields north of 5% without credit risk, investors may require greater compensation to hold volatile assets such as cryptocurrencies.

At the same time, some market participants point to growing interest in a so-called "debasement trade," the idea that persistent government borrowing and currency expansion will erode dollar purchasing power and support stores of value like Bitcoin. Vanessa Grellet, managing partner at crypto venture firm Arche Capital, told Delphi Digital that this trade does not require low interest rates and is being driven by attention to rising federal deficits and mounting interest costs.

The near-term monetary policy outlook shifted after a weaker-than-expected September jobs report: the US economy added 29,000 payrolls, well below estimates, and the print contributed to a sharp decline in the market's perceived odds of an October rate increase. CME Group's FedWatch Tool put the probability of an October hike at about 24%, down from more than 75% a week earlier. Several Fed officials, including New York Fed President John Williams, have signaled no urgency for additional tightening following the September policy action.