Bitcoin withstood 5% yields, but crypto’s era of cheap money is over

The US 10-year Treasury yield touched 5.34% on Oct. 1, its highest level since 2002, capping a third quarter in which it climbed almost 90 basis points, marking the largest quarterly rise this century. Bitcoin gained about 43% over the same three-month period, while Ethereum rose approximately 71%.

Bitcoin is currently trading in the mid-$80,000s, and the clearest evidence of the yield shock is visible in the financing structures built around it.

A 5% yield raises the bar, and Q3 buyers cleared it

The Federal Reserve’s H.15 release for Oct. 1 reported the 10-year yield at 5.29%, the 30-year at 5.64%, and the 10-year real yield at 2.93%. Inflation-adjusted returns on government debt now compete directly with a coupon-free asset.

Bond yields climbed to new highs across the US, France, Germany, Japan, and the UK, where 30-year borrowing costs reached 6% for the first time since 1998. Brent crude also moved back above $100 a barrel.

Against this backdrop, US-traded spot Bitcoin ETFs attracted approximately $6.3 billion in the third quarter, while Ethereum ETFs drew about $3 billion.

Citi raised its 12-month Bitcoin price forecast to $113,000 from $82,000, citing stronger crypto activity, ETF inflows, and gradual allocations by advisers and brokerages. While higher yields remained a headwind, other sources of demand outweighed this pressure in the third quarter.

One quarter leaves the long-run relationship open, with ETF demand and adviser allocations shaping the outcome alongside yields.

On Sept. 23, a stronger Purchasing Managers’ Index (PMI) pushed yields higher, causing Bitcoin to slip below $85,000. This triggered $135.8 million in long liquidations in a single hour and $510 million over 24 hours.

A separate energy shock involving oil, bond yields, and Federal Reserve expectations triggered about $568 million in forced liquidations. The quarter’s overall direction survived both events, with leveraged traders absorbing the damage.

Bitcoin leverage gets repriced

On Sept. 25, open interest on selected exchanges fell 14.3% as Bitcoin held near $84,000 with the 10-year yield at 5.22%. Higher benchmark rates raise the cost of capital for explicit borrowing and implicit leverage mechanisms such as perpetual futures, basis trades, options structures, and collateralized loans.

Macro shocks also lift volatility enough to force deleveraging even within a bull run.

Bitcoin treasury companies fund purchases through common equity, preferred stock, and convertible debt, according to Skadden. This model works when shares trade at a premium to net asset value (NAV), as selling stock for more than the crypto behind it allows the purchase of more crypto per share.

Goodwin describes the sector’s compression from premium valuations to NAV or below. Business models that depend on premium-priced equity and debt are facing strain, and many treasury companies now trade at or below NAV.

Higher yields lift the return investors demand on preferred shares and convertibles, widen the risk premium on equity, and offer a higher risk-free alternative. Each of these factors raises the hurdle for a financing model that already depended on NAV premiums and cheap hybrid capital.

Individual discounts also reflect crypto-specific and company-specific factors, with yields shaping the broader backdrop.

Treasury yields reach DeFi

A 2026 Finance Research Letters study using Aave data found that stablecoin borrowing and deposit rates are linked to US Treasury yields, with the 10-year showing the most consistent added explanatory power across maturities.

An ECB working paper on Aave found that restrictive monetary shocks reduce both stablecoin borrowing demand and liquidity supply, with transmission depending on the balance between arbitrage and leverage channels.

Those links vary by market and period, and individual DeFi rates follow their own supply and demand. Bitcoin’s spot price can move through a Treasury shock for weeks, while crypto’s dollar funding markets feel the impact through borrowing costs.

Related Reading

Bitcoin survives a 5.2% Treasury shock as traders slash $1.7 billion in leverage

In the zero-rate era, a 4% or 5% crypto yield looked attractive against cash that paid close to zero. At a 5% Treasury yield, DeFi yields must cover smart contract, liquidity, counterparty, stablecoin, oracle, and governance risk. Products need higher returns, leverage, token incentives, or different liquidity structures to compete.

RWA.xyz lists 108 tokenized US Treasury fund products, including USYC, USDY, BUIDL, and iBENJI. The San Francisco Fed estimates that stablecoin issuers’ Treasury holdings could roughly double to about $400 billion by 2030 if recent growth continues.

Where Bitcoin and its plumbing go from here

If the 10-year yield falls back below 5% as oil and inflation cool and adviser and brokerage allocations continue, Citi’s $113,000 forecast becomes the reference point for institutional demand.

Treasury-company premiums could reopen, basis trades would improve, and tokenized collateral adoption would broaden, fitting within Citi’s tokenization range of $5.5 trillion to $8.2 trillion by 2030.

If yields hold near 5% and real yields stay close to 3%, Bitcoin can keep rallying in bursts, with each data shock raising the odds of a liquidation flush.

Treasury-company discounts would persist, preferred and debt financing would cost more, DeFi borrowing rates would climb, and low-risk DeFi yields would lose appeal against tokenized Treasuries.

A disorderly bond or oil move would put the most weight on leveraged perpetuals, crypto-backed loans, and treasury-company debt and preferred stacks.

Bitcoin’s price absorbed the third quarter’s bond shock, while the financing structures around it took the repricing.

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