Bond Yields Drive Crypto Market Decline Amid Tensions

Once again, cryptocurrency values faced significant downward pressure on Friday as market attention shifted from crude oil to rising Treasury yields. Bitcoin fell beneath the $69,000 mark after experiencing a brief rally earlier in the week, while ether also recorded a decrease. This decline coincided with diminishing expectations for a swift resolution to the conflict in Iran and the US 10-year Treasury yield remaining close to 4.42%.

The Kobeissi Letter highlighted that investors had been distracted by oil prices and geopolitical tensions for weeks. However, they emphasized that a more impactful force was emerging; the bond market was starting to dictate trends across various asset classes, including equities and commodities, and could influence monetary policy as well.

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This week’s market activity aligned with that perspective. Following comments from President Donald Trump, who announced a temporary halt to attacks on Iranian energy facilities, Treasury yields initially dipped. Despite this, the lower yields did not last long.

By the conclusion of trading, the 10-year Treasury yield reached 4.415%, marking the highest level since July. Mortgage rates had also surged, reaching their highest point since October. Fed Governor Lisa Cook noted that the ongoing war was shifting the balance of risks towards inflation. Futures markets signaled a minimal probability of a Federal Reserve rate cut occurring in 2026.

The market’s volatility was underscored by the MOVE Index—indicating Treasury volatility—which climbed to 115.02, a 17.86% increase for the day. Kobeissi further analyzed the FedWatch distribution, suggesting that markets now anticipate a prolonged period of stable rates through September 2027, a notable shift from discussions just last year regarding potential rate cuts.

This shift represents a historic change:

In just under a month of conflict, the focus has transitioned from potential Federal Reserve rate cuts to discussions of rate hikes.

Previously, investors were speculating on the number of rate reductions for 2026. Now, there’s a 48% chance of a rate increase by January 2027.

Kobeissi correlated this re-evaluation to a weakening labor market, with substantial downward revisions to payroll data and an increase in unemployment duration. For the cryptocurrency sector, this situation is clear: it remains sensitive to liquidity shifts.

<pAfter Trump’s announcement on March 23 regarding the halt of military actions, bitcoin saw a rally of over 5%, climbing to $71,794 in New York. However, that uptick has unwound, and by Friday, bitcoin was priced at $68,639, while ether traded at $2,061.81, reflecting a decrease as the focus returned to yields and potential changes in monetary policy.

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Arthur Hayes, co-founder of BitMEX, expressed the crypto perspective directly. He questioned what actions the Treasury Secretary might take if military actions escalated and market conditions worsened.

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If Trump invades Iran what is Buffalo Bill Bessent going to do to calm the UST market?

The implication is that while geopolitical tensions can create market instability, a more pronounced sell-off in Treasuries might provoke a response from Washington. Hayes indicated that the crypto market would likely not rebound simply because of eased tensions; instead, recovery would hinge on the severity of stress within the bond market and the subsequent liquidity that might re-enter the system.

Kobeissi echoed this notion, suggesting that as yields approach the 4.50% to 4.70% range for the 10-year Treasury, the likelihood of a policy response increases. The White House has already demonstrated a keen sensitivity to bond market fluctuations.

This environment leaves the crypto market closely aligned with the same indicators that traditional macro investors monitor: Treasury yields, rate forecast expectations, and the reliability of any reported easing of tensions. Should bond volatility diminish, cryptocurrencies may respond positively, as seen in previous reactions to favorable war updates. However, if yields continue to rise, assets in the crypto space may be viewed more as components of the broader global interest rate landscape rather than safe havens against geopolitical risks.

As of the latest data, the total market capitalization of cryptocurrency was reported at $…