Widening US Bond Yield Spread Poses Bearish Threat to Bitcoin

The spread between longer-dated and shorter-dated US Treasury bonds has climbed to levels not seen since 2021, raising concerns about Bitcoin's near-term prospects as institutional investors may pivot toward higher-yielding traditional assets.

According to fixed income analysts, the widening gap is being driven primarily by Japan's bond market turmoil, where 30-year yields surged to a record 3.92% this week. The differential between Japan's 30-year and 2-year bonds has expanded by 220-325 basis points, with forecasts suggesting an additional 75-100 basis point increase ahead due to government spending pledges.

Since US long-term yields tend to track their Japanese counterparts, market observers expect continued upward pressure on American bond rates. Higher yields typically make non-yielding assets like Bitcoin less attractive to investors, potentially triggering outflows from the cryptocurrency market.

The challenging environment is compounded by gold's recent outperformance, which Bloomberg Intelligence suggests is drawing capital away from Bitcoin toward more traditional inflation hedges. This dynamic could make it difficult for Bitcoin to reclaim the $100,000 threshold as investors favor lower-volatility stores of value.

Some analysts note the setup aligns with projections calling for Bitcoin to bottom in the $40,000-50,000 range by late 2026.