Bitcoin has experienced a significant correction recently, dropping approximately 12% in under two weeks. While a 12% dip might not seem drastic at first glance, this is the largest 14-day decline the cryptocurrency has encountered since the tariff-related correction in April 2025. This downturn was marked by Bitcoin breaking below a rising wedge pattern, a bearish technical formation suggesting the potential for further declines. If this pattern unfolds fully, Bitcoin’s value could plunge to around $90,000 or possibly even fall lower.
To grasp the drivers behind Bitcoin’s recent price behavior, it is essential to examine the broader financial landscape, particularly the US Treasury bond market. Treasury bond yields are a cornerstone of the global financial system, influencing everything from mortgage rates to stock and gold valuations. Notably, Bitcoin's price movements have exhibited varying correlations with Treasury yields over time.
Between 2022 and 2023, Bitcoin showed an inverse relationship with the 10-year Treasury yield. As yields climbed amid soaring inflation concerns, Bitcoin’s price was pressured downward, experiencing a steep 70% decline. When yields stabilized in 2023, Bitcoin found a bottom and embarked on a strong recovery. Interestingly, starting in 2024, Bitcoin and Treasury yields shifted to a positive correlation. Investors have treated falling yields as a signal of economic slowdown, seeking safety in assets like Bitcoin when economic growth falters. Conversely, when yields rose alongside signs of economic expansion, Bitcoin also advanced.
However, since May 2025, a notable divergence has emerged: Treasury yields have gradually declined, yet Bitcoin’s price has continued to rise. This discrepancy sets the stage for three divergent scenarios influencing Bitcoin's next significant price move:
- Continued Growth Scenario: Bitcoin keeps rising in tandem with strengthening economic growth, which subsequently causes Treasury yields to climb and align with Bitcoin's upward trajectory.
- Growth Scare with Fed Intervention: Echoing August 2024’s pattern, economic indicators such as a weakening labor market and rising unemployment could pull Treasury yields lower, triggering a short-term Bitcoin decline of around 30%. The Federal Reserve responded to that growth scare with rapid interest rate cuts, which sparked a strong Bitcoin rally. A similar scenario today would likely lead to short-term volatility but could create buying opportunities as easing policies stimulate growth.
- Economic Collapse Scenario: An outright contraction in economic growth would send Treasury yields tumbling sharply and cause a major Bitcoin sell-off, similar to the crash during the 2020 recession when yields dropped from 1.6% to 0.5% in under two months, and Bitcoin plunged by 60%. Such a downturn would also exert pressure on the stock market, to which Bitcoin is highly correlated.
Recent economic data points to a cooling labor market. The US non-farm payrolls report reveals that the blazing job growth seen in 2021 and 2022 has stalled dramatically. This slowdown edges the economy closer to a tipping point where job losses could accumulate—a typical precursor to economic contractions. Public sentiment echoes these concerns, with 62% of Americans anticipating rising unemployment over the next year, a sentiment level not seen since the 2008 financial crisis.
Despite these headwinds, there are still reasons to believe a recession is not imminent. The homebuilder sector, known for its sensitivity to macroeconomic shifts and an early indicator of economic changes, has shown substantial strength. Following a low point in April 2025, homebuilders have rallied over 35%, signaling resilience amid recent challenges. This sector’s recovery suggests economic growth could hold steady or rebound in the medium term, supporting bullish prospects for Bitcoin.
In the short term, however, Bitcoin’s recent breakdown has warranted caution, prompting a reduction in crypto exposure due to the risk of a near-term growth scare that might push prices lower. Nevertheless, the broader outlook remains optimistic, with expectations that economic growth will sustain or recover later this year, eventually driving Bitcoin prices higher. Investors are advised to remain vigilant for strategic buying opportunities that offer a favorable risk-reward balance.
While the crypto market navigates these uncertain waters, it’s clear that Bitcoin’s trajectory remains closely intertwined with broader economic conditions and financial market trends. Staying informed on macroeconomic developments—particularly in Treasury yields and labor market data—will be crucial for investors looking to understand and capitalize on Bitcoin’s moves in the coming months.
By Wolfy Wealth - Empowering crypto investors since 2016
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile.
