Impact of 10-Year U.S. Treasury Yield on Cryptocurrency Yields?

Author: Onkar Singh, CoinTelegraph; Compiler: Baishui, Golden Finance

1. Understanding the 10-Year Treasury Yield: Definition and Importance

The 10-Year Treasury Yield is the interest rate the U.S. government needs to pay to borrow money for 10 years.

When the government needs cash, it issues bonds called Treasury bonds, and the 10-year Treasury bond is one of the most watched bonds. The "yield" is the annual return on buying that bond and holding it to maturity. It is expressed as a percentage, such as 4% or 5%.

Imagine that the government said, "Lend me $1,000, and I will pay you back with interest in 10 years." This interest rate and yield will fluctuate up and down based on bond demand, inflation expectations, and overall economic conditions. Because U.S. Treasury bonds are considered safe (the government is unlikely to default), the 10-year Treasury yield is a benchmark for "risk-free" returns in the financial sector.

Why is this so important for cryptocurrencies? Cryptocurrency yields and stablecoins are part of the wider financial world, and the 10-year Treasury yield affects investor behavior, which in turn ripples into the cryptocurrency market. Let's take a deeper look.

2. The impact of the 10-year Treasury yield on global financial markets

The 10-year Treasury yield is not unique to the United States - it plays a big role in global financial markets, affecting everything from stock markets to currencies to emerging economies.

Because the dollar is the world's reserve currency and U.S. Treasuries are a global safe haven, changes in the 10-year Treasury yield can send shockwaves around the world. Here are the details:

• Stock Market: Rising Treasury yields can lead to a pullout of funds from stocks, especially growth stocks such as technology companies, as investors can get higher returns from bonds. In 2021, when yields soared, tech indexes such as the Nasdaq were hit hard as investors turned to safer assets. The shift could set the stage for how investors view riskier assets like cryptocurrencies.

• Global Borrowing Costs:The 10-year Treasury yield influences interest rates around the world. When yields rise, so do borrowing costs for companies and governments, which can slow economic growth. In 2022, for example, rising yields led to tighter financial conditions, affecting everything from corporate lending in Europe to mortgage rates in Asia.

• Currency Markets:Rising 10-year Treasury yields lead to a stronger dollar as investors flock to dollar-denominated assets. A stronger dollar can make cryptocurrencies, which are typically denominated in dollars, more expensive for international investors, potentially dampening demand. It also puts pressure on emerging market currencies because their debts, which are often denominated in dollars, cost more to repay.

• Emerging Markets:Countries with weaker economies rely on cheap borrowing. When U.S. Treasury yields rise, capital flows from riskier emerging markets to U.S. bonds, causing volatility in their stock and bond markets. This could spill over into the cryptocurrency market, as investors in those regions may sell crypto assets to make up for losses elsewhere.

• Inflation and Monetary Policy:The 10-year Treasury yield is a barometer of inflation expectations. If yields rise as investors anticipate higher inflation, central banks such as the Federal Reserve may raise interest rates, tightening global liquidity. This could reduce speculative investment in assets such as cryptocurrencies, as was seen in 2022 when aggressive rate hikes led to a market cooldown.

For cryptocurrency investors, this global impact sets the backdrop. Rising 10-year Treasury yields could portend tougher market conditions for cryptocurrency prices and yields, especially amid turbulent global markets. Conversely, low yields tend to stimulate risk appetite, boosting speculative assets such as cryptocurrencies.

III. Rising Treasury yields: Will safer returns take away the yield appeal of cryptocurrencies in 2025?

The 10-year Treasury yield is an important indicator of global financial health, and the yield has shown significant volatility in 2025. As of May 9, 2025, the yield is approximately 4.37%-4.39%.

The volatility of yields is driven by factors such as trade tensions, inflation expectations and Fed policy, and recent interest rate cuts have not reduced yields as expected, which is contrary to historical trends.

In the cryptocurrency space, yields are earned through activities such as staking, lending and liquidity provision, and typically provide returns of 5%-10% or even higher. However, the rise in 10-year U.S. Treasury yields has brought challenges.

Research shows that higher yields on safe assets may reduce demand for riskier cryptocurrency yields, as investors may prefer the stability of U.S. Treasuries. This competition for capital could lead to a drop in participation on crypto lending platforms, which could push up yields to attract users, but overall market activity could fall.

This is because many crypto platforms need to borrow money to operate, and their borrowing costs are tied to broader interest rates, and the 10-year U.S. Treasury yield affects broader interest rates. If interest rates rise, these platforms may pass on higher costs to users, affecting the yield you receive.

How Treasury yields affect stablecoins

Stablecoins like Tether's USDt and USDC are closely tied to traditional finance because their value is often backed by assets like cash, bonds, or — you guessed it — U.S. Treasuries.

Here's how the 10-year Treasury yield affects stablecoins:

• Backing assets:Many stablecoins, such as USDC, hold U.S. Treasuries in their reserves to maintain their peg to $1. Rising US Treasury yields (currently 4.39%) mean more income for stablecoin reserves, which could theoretically be passed on to users as yield.

• Regulatory complexity:The regulatory framework in some countries complicates this process. In the EU, the Crypto-Assets Market Regulation (MiCA) prohibits stablecoin issuers and crypto-asset service providers (CASPs) from offering interest to discourage their use as a store of value, but users can still earn yield through decentralized finance (DeFi) platforms.

• Opportunity Cost:If 10-year Treasury yields are high, holding stablecoins (which typically have lower yields than riskier cryptocurrencies) may not be as attractive as buying U.S. Treasuries directly. Investors may pull funds out of stablecoins, reducing the funds available for lending and potentially reducing stablecoin yields.

• Market Sentiment:Rising U.S. Treasury yields typically signal tighter monetary policy (such as a rate hike by the Federal Reserve), which could disrupt cryptocurrency markets. For example, in 2023, when yields reached their highest point in many years, cryptocurrency prices (including stablecoin-related tokens) felt pressure as investors became more cautious. This may indirectly affect the yield of stablecoins as platforms adjust according to market conditions.

• DeFi Dynamics: In decentralized finance (DeFi), stablecoins are the backbone of lending and trading. If US Treasury yields rise and traditional finance becomes more attractive, DeFi platforms may see less activity, thereby reducing the yield of stablecoin pools. On the other hand, some DeFi protocols may increase yields to maintain user engagement.

It is worth noting that there are increasing calls for regulations to allow stablecoins to share revenue with users, especially in jurisdictions such as the UK and the US where legislative work is underway. This debate is crucial because allowing revenue sharing can enhance the adoption of stablecoins and thus increase fiscal revenue, but clear regulatory provisions are needed to avoid legal risks.

V. USDC vs. US Treasuries: How should your funds be invested?

USDC staking offers higher but volatile returns with moderate risk, while US Treasuries offer stable, low-risk returns that are government-backed.

When users stake USDC (by lending it on platforms like Aave or Coinbase), they can earn a floating yield, typically between 4% and 7% annually, depending on demand and platform risk.

US Treasuries, especially 10-year bonds, offer fixed returns; yields are around 4.37%-4.39%. These securities are backed by the US government, making them one of the safest investments.

While USDC can offer higher returns, it comes with additional risks, such as smart contract vulnerabilities, platform failures, and regulatory changes. US Treasuries, while safer, offer limited upside.

Six, the impact of rising Treasury yields on cryptocurrency investors

For cryptocurrency investors, higher Treasury yields may reduce risk appetite, but tokenized Treasury bonds provide a safe alternative.

If you are considering staking your Ethereum or lending USDC, understanding the trend of Treasury yields can let you know in advance whether yields will rise, fall, or bring additional risks.

For example:

• If yields rise, this may indicate that cryptocurrency yields may become more competitive, but it may also mean that global markets are becoming nervous. You should probably stick to investing in stablecoins or safer platforms.

• If yields are low, investors may want to put money into cryptocurrencies, which offer higher yields but also increased volatility. This could be an opportunity to earn more, but you need to be aware of the risks.

Also, if you use stablecoins to store cash or earn extra yield, the 10-year Treasury yield can hint at whether those yields will remain attractive or if you are likely to find better returns elsewhere. Due to the global reach of stablecoins, yields can signal broader economic changes that could impact your crypto strategy.

Also, if regulations evolve to allow for revenue sharing, particularly in the U.S., stablecoin holders could benefit from higher reserve income, although EU restrictions push yield creation into DeFi. Alternatively, traditional investors could explore tokenized Treasuries to gain blockchain-based exposure to Treasuries and potentially integrate them into a broader portfolio when there is more regulatory clarity.

A notable development for 2025 is the rise of tokenized Treasuries, digital representations of U.S. Treasuries on the blockchain. According to an analysis by RWA.xyz, as of May 4, 2025, the total value of tokenized Treasuries has reached $6.5 billion, with an average yield to maturity of 4.13%. This trend offers crypto investors a way to earn returns comparable to traditional bonds, potentially mitigating the impact of rising U.S. Treasury yields on the crypto market.

In addition, the emergence of tokenized Treasuries signals a blurring of the line between traditional finance and decentralized ecosystems. These blockchain-based government debt instruments not only provide yield stability, but also reflect a broader trend: the integration of real-world assets (RWAs) into the cryptocurrency market. This development has the potential to reshape risk management practices, attract more conservative capital, and accelerate regulatory involvement in digital assets.