Summary
- A sharp flattening of the U.S. Treasury yield curve, with the 10-year/2-year spread at its tightest since April 2025, is signaling a more hawkish Federal Reserve stance.
- Higher-for-longer interest rate expectations are making fixed-income assets more attractive relative to non-yielding risk assets like bitcoin.
- The Fed’s latest projections demonstrate policy rates staying higher through 2028, complicating prospects for a near-term bitcoin bull run.
Something has drastically shifted in the bond market, and it’s offering negative cues to risk assets, including bitcoin BTC$64,010.98.
The gap between the U.S. 10- and two-year Treasury yields has narrowed to just 28 basis points, the tightest spread since April 2025, as reported by data source TradingView.
That’s what’s known as yield curve flattening, and it’s flashing “the clearest market signal that the Fed is getting more hawkish,” as reported by Skanda Amarnath, executive director of EmployAmerica, a policy research organization focused on monetary, fiscal, and industrial-level policies.
A more hawkish Fed generally means higher interest rates for longer, and that’s bad news for bitcoin and other assets that offer no inherent yield. As expectations for higher interest rates firm up, fixed-income investments become more attractive relative to non-yielding risk assets like crypto, often pulling capital away.
The flattening isn’t isolated to the 10-year/2-year spread either. The gap between 30-year and 5-year yields has also narrowed to its lowest level since April of last year, reinforcing the broader shift.
