Bitcoin Monday’s gains were said to be driven by expectations that the Federal Reserve will cut interest rates this week, even as a continued rise in U.S. Treasury yields signaled caution.
The Fed is expected to lower its target interest rate by 25 basis points to a range of 3.5%-3.75%. This would be the third consecutive reduction in borrowing costs, with a cumulative reduction of 175 basis points since September 2024.
Rate cuts typically inject liquidity into the financial system. This cheaper capital encourages borrowing and investing, stimulating risk-taking behavior throughout financial markets and the broader economy. Lower policy rates also suppress short-term rates across the curve, pushing bond prices higher and lowering yields.
The net expected result is bullish momentum in risk assets and lower Treasury yields.
CoinDesk data shows that BTC’s performance seems to be consistent with this, with the trading price rising by more than 1.5% on the day, close to $91,800. Since falling nearly $80,000 about three weeks ago, the price has made higher lows and higher highs.
What’s surprising is that Treasury yields are rising, not falling. The benchmark 10-year Treasury bond yield is currently 4.15%, the highest since November 20, up 2 basis points on the day and nearly 20 basis points since November 28.
Hawk cuts?
Observers believe that the yield trend indicates that a rate cut is a foregone conclusion, and bond traders are pricing in Chairman Jerome Powell’s possible non-committal stance on further easing in 2026. This “hawkish rate cut” could put pressure on risk assets including Bitcoin.
“The risk, however, is not the rate cut itself, but the subsequent press conference,” Markus Thielen, founder of 10x Research, told CoinDesk. “Powell may signal a pause rather than further cuts, an outcome that bond markets have already prepared for and that crypto markets have largely ignored so far.”
Greg Magadini, head of derivatives at Amberdata, said recent weakness in U.S. labor market and inflation data, including Friday’s delayed core personal consumption expenditures data for September, supported the case for a rate cut. However, the focus will be on mentoring.
“The market will focus on whether the Fed’s interest rate cut is dovish or hawkish,” Magaddini said.
Analysts at Dutch investment bank ING said the Fed’s growing disagreement over whether inflation or labor market weakness is the main problem indicates that the pace of interest rate cuts will slow in 2026.
“With the lack of timely data, we doubt the Fed will suddenly become more accommodative on inflation rhetoric,” analysts said in a note to clients. “As such, the most dovish they can do is likely to be a second rate cut to their 2026 forecast, but they will be reluctant to do so.”
Staying away from the Fed, Jeff Anderson, head of Asia at STS Digital, said the rise in 10-year Treasury yields was consistent with a pattern seen in recent months, which has seen a rebound from 4%.
“Interest rate volatility has been very low since the summer and the market has been happy to sell Treasuries (buy yields) every time we have rates down to 4.00%,” Anderson said.
Anderson explained that the market is currently more focused on Japanese government bond yields and their impact on global markets. Over the weekend, CoinDesk discussed how a rate hike in Japan could raise global bond yields, potentially causing market jitters.
Anderson pointed out: “The market is more focused on Japanese yields (potential interest rate hikes in December and deleveraging of risk assets) and whether the Fed starts buying Treasury bonds this week.”
The recent tightening of U.S. dollar liquidity has fueled speculation that the Fed will soon announce “reserve management purchases, including purchases of short-term Treasury bills or Treasury bills.” Some observers say the Fed may discuss such purchases this week.
