Bitcoin’s recent market movements have sparked much debate among investors and analysts alike. In the span of less than two weeks, Bitcoin experienced a 12% price correction—the largest 14-day decline since a tariff-driven pullback in April 2025. While a 12% drop might not seem overly alarming on the surface, the broader technical and macroeconomic context reveals much deeper implications.
A key technical indicator that has drawn attention is Bitcoin breaking down from a rising wedge pattern—a chart formation often interpreted as bearish. If this pattern fully plays out, Bitcoin’s price could decline as far as $90,000 or even lower in the near term. However, to truly grasp what lies ahead for Bitcoin, it’s crucial to move beyond price charts and look at an often overlooked but vitally important market: the US Treasury bond market.
The Treasury Bond Market’s Overlooked Influence on Bitcoin
The US Treasury bond market underpins the entire global financial system. Treasury yields reflect investor expectations about economic growth and inflation, influencing borrowing costs such as mortgage rates, and directly impacting pricing across assets including stocks, gold, and notably, Bitcoin.
Historically, shifts in Treasury yields have strongly correlated with Bitcoin’s price. For example, during 2022, as fears of escalating inflation pushed long-term Treasury yields higher, Bitcoin suffered a significant 70% decline. This period saw an inverse correlation between Bitcoin and the 10-year Treasury yield. However, by 2023, as yields stabilized and inflation concerns eased, Bitcoin found a bottom and surged upwards.
Interestingly, this relationship evolved in 2024. Bitcoin’s correlation with Treasury yields flipped to a positive one. Investors tended to buy Bitcoin during periods of rising yields, which corresponded to stronger economic growth signals. Conversely, when economic growth slowed and yields fell, investors sought safer assets, temporarily moving away from Bitcoin.
Since May 2025, though, there has been an unusual divergence: Treasury yields have been trending lower, suggesting expectations of slower growth or softer inflation, while Bitcoin has continued an upward grind. This divergence sets up three potential scenarios for Bitcoin’s trajectory moving forward, each with very distinct implications.
Scenario 1: Strengthening Growth and Rising Yields Support Further Bitcoin Gains
In the first scenario, economic growth would strengthen over time, prompting a rise in Treasury yields. Should yields catch up with Bitcoin’s price, the positive correlation observed in 2024 could resume. This would likely support continued gains in Bitcoin as investors regain confidence in growth prospects and risk appetite remains robust.
Scenario 2: A Temporary Growth Scare Spurs Volatility Before a Fed-Induced Recovery
The second scenario mirrors the dynamics seen in August 2024. At that time, emerging weak economic data—like a softening labor market and rising unemployment—caused 10-year Treasury yields to plunge from 4.7% to 3.6%. Bitcoin followed suit, shedding 30% of its value. However, the Federal Reserve responded proactively by cutting interest rates three times, which ultimately triggered a strong Bitcoin rally into the year-end.
If a similar temporary slowdown occurs now, it would create short-term volatility in Bitcoin as yields fall. But a Fed intervention could reverse the trend, leading to renewed rises in both Treasury yields and Bitcoin prices once economic stabilization or growth resumes.
Scenario 3: An Economic Contraction Triggers a Sharp Sell-Off in Bitcoin
The third and most severe outcome would be an outright collapse in economic growth. Such a scenario would likely cause Treasury yields to plummet as investors seek safety in government debt. Reflecting on the 2020 recession provides a stark example; bond yields dropped precipitously, from about 1.6% to 0.5%, accompanied by a staggering 60% crash in Bitcoin as markets plunged into contraction mode.
If this happens again, the stock market would likely mirror the downturn, deepening the sell-off in Bitcoin due to the cryptocurrency’s strong correlation with equity markets. This underscores Bitcoin’s vulnerability in a broad recessionary environment, despite its long-term narrative as a store of value.
Conclusion: Understanding Bitcoin’s Next Chapter Requires a Broader Lens
Bitcoin’s true potential is entwined not just with its internal blockchain dynamics or price patterns but is deeply influenced by macroeconomic forces, particularly the US Treasury bond market. Monitoring shifts in Treasury yields and broader economic signals offers crucial insight into where Bitcoin may head next.
Investors and observers often narrowly focus on Bitcoin’s price volatility and technical charts without appreciating these wider economic contexts. This oversight misses the nuanced ways traditional financial markets and monetary policy shape Bitcoin’s trajectory. Whether Bitcoin continues to ascend, faces temporary turbulence, or endures a deeper downturn will largely hinge on the interplay between economic growth expectations, Treasury yields, and Federal Reserve actions in the months ahead.
By integrating these insights, market participants can better navigate Bitcoin’s complexities and uncover opportunities that many currently overlook—unlocking the true, untapped potential of this pioneering digital asset.
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.
