On Oct. 1, the US 10-year Treasury yield hit 5.34%, marking its highest level since 2002 and capping a third quarter characterized by an increase of nearly 90 basis points—the largest quarterly jump seen this century. Over that same three-month span, Bitcoin rose by roughly 43% and Ethereum advanced about 71%.
Currently trading in the mid-$80,000s, Bitcoin’s ecosystem shows the impact of this yield shock most clearly within the financing structures built around the asset.
A 5% yield raises the bar, and Q3 buyers cleared it
According to the Federal Reserve’s H.15 release for Oct. 1, the 10-year yield stood at 5.29%, the 30-year at 5.64%, and the 10-year real yield at 2.93%. Government debt now offers inflation-adjusted returns that directly compete with coupon-free assets.
New bond yield highs were recorded across the US, France, Germany, Japan, and the UK, where 30-year borrowing costs crossed the 6% threshold for the initial time since 1998. Meanwhile, Brent crude climbed back past $100 a barrel.
Despite this macroeconomic environment, US-traded spot Bitcoin ETFs attracted approximately $6.3 billion during the third quarter, while Ethereum ETFs brought in about $3 billion.
Citing expanding crypto activity, ETF inflows, and steady allocations from advisers and brokerages, Citi revised its 12-month Bitcoin target upward from $82,000 to $113,000. Although higher yields remained a headwind throughout the third quarter, demand from other areas ultimately outweighed it.
While a single quarter leaves the long-term relationship open to interpretation, yields alongside ETF demand and adviser allocations collectively dictated the outcome.
A stronger PMI on Sept. 23 drove yields upward, sending Bitcoin down below $85,000. This drop resulted in $135.8 million in long liquidations during a single hour and a total of $510 million across 24 hours.
An energy shock involving oil, shifting Federal Reserve expectations, and bond yields sparked roughly $568 million in forced liquidations. Leveraged traders absorbed the damage, but the overall quarterly trend persevered through both incidents.
Bitcoin leverage gets repriced
Open interest on select exchanges dropped 14.3% on Sept. 25 while Bitcoin hovered around $84,000 and the 10-year yield sat at 5.22%. Higher benchmark rates increase the capital costs for explicit borrowings as well as implicit leverage like collateralized loans, basis trades, perpetual futures, and options structures.
Additionally, macro shocks can generate enough volatility to force deleveraging events even in the middle of a bull run.
Skadden notes that Bitcoin treasury firms fund their acquisitions using a mix of common equity, convertible debt, and preferred stock. This business model functions effectively when shares trade at a premium over net asset value (NAV), because selling stock priced higher than the underlying crypto allows the firm to buy more crypto per share.
Goodwin highlights a market compression that has pushed valuations from a premium down to NAV or lower. Companies relying on cheap hybrid capital and premium-priced equity are experiencing pressure, with numerous treasury firms now trading at or below NAV.
Elevated yields drive up the returns investors expect from convertibles and preferred shares, expand the risk premium on equity, and supply a more lucrative risk-free alternative. Each factor raises the hurdle for a financing framework already reliant on cheap hybrid capital and NAV premiums.
While individual discounts also stem from company- and crypto-specific conditions, yields establish the overarching environment.
Treasury yields reach DeFi
A study published in 2026 in Finance Research Letters utilized Aave data to demonstrate a link between US Treasury yields and stablecoin borrowing and deposit rates, noting that the 10-year yield delivered the most consistent explanatory power across various maturities.
Similarly, an ECB working paper focusing on Aave indicated that restrictive monetary shocks diminish both liquidity supply and stablecoin borrowing demand, with transmission relying on the balance between leverage and arbitrage channels.
Although these connections fluctuate across different periods and markets—and individual decentralized finance (DeFi) rates follow separate supply and demand dynamics—crypto’s dollar funding markets still feel the impact through borrowing expenses, even if Bitcoin’s spot price absorbs a Treasury shock for weeks.
During the zero-rate period, a crypto yield of 4% or 5% appeared appealing compared to cash returning close to zero. With 5% Treasuries, however, DeFi yields must account for governance, counterparty, smart contract, liquidity, stablecoin, and oracle risks. To stay competitive, these products now require enhanced returns, token incentives, alternative liquidity sources, or higher leverage.
Platforms like RWA.xyz track 108 tokenized US Treasury fund products, including USDY, USYC, iBENJI, and BUIDL. Furthermore, projections from the San Francisco Fed suggest that stablecoin issuers’ Treasury holdings could double to roughly $400 billion by 2030 if current growth trends persist.
Where Bitcoin and its plumbing go from here
If cooling inflation and oil prices pull the 10-year yield back under 5%—and if brokerage and adviser allocations persist—Citi’s $113,000 forecast becomes the primary benchmark for institutional demand.
Such conditions could reopen treasury-company premiums, improve basis trades, and broaden the adoption of tokenized collateral, aligning with Citi’s projection that tokenization will reach between $5.5 trillion and $8.2 trillion by 2030.
Conversely, if yields remain near 5% alongside real yields close to 3%, Bitcoin may continue to rally in bursts, though each data release will elevate the risk of a liquidation flush.
Under that scenario, discounts on treasury companies would endure, debt and preferred financing would become more expensive, DeFi borrowing rates would rise, and low-risk DeFi yields would lose their attractiveness relative to tokenized Treasuries.
An abrupt or disorderly move in oil or bond markets would place the heaviest burden on leveraged perpetuals, treasury-company debt and preferred stacks, and crypto-backed loans.
Ultimately, Bitcoin’s price weathered the bond market shock of the third quarter, while the supporting financial infrastructure absorbed the repricing.