Bitcoin all-time high faces trouble with soaring yields

May 22, 2025

This article was updated on

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3D metallic Bitcoin symbol with upward and downward arrows on a dark background, representing price volatility and market uncertainty in cryptocurrency.

Bitcoin has done it again, defying expectations and surged to a fresh all-time high above $109,800. The crypto bulls are celebrating, but just as the party kicked off, a jolt from the bond market reminded everyone that traditional finance still holds the reins.

On 21 May, what should have been a routine US Treasury bond auction shook global markets. Bond yields spiked, equities stumbled, and Bitcoin? It hesitated. A new question is now front and centre: can Bitcoin keep climbing, or is a macroeconomic reality check about to catch up with it?

Bitcoin ETF inflows surge

Bitcoin (BTC) smashed through $109,800 this week, surpassing its previous record of $109,588. That’s a 47% rise from early April lows near $75,000, driven by a combination of institutional inflows, renewed ETF enthusiasm, and improving risk appetite as the US wrapped up key trade agreements.

It’s the second time in 2025 that BTC has set a fresh record, and the momentum hasn’t been limited to spot prices. Open interest in Bitcoin futures hit a record $75.14 billion, according to Coinglass - a strong indication that new capital continues to flow into crypto.

Line chart showing Bitcoin futures open interest reaching a record $75.14 billion in May 2025, indicating strong capital inflows into the crypto market. — Source: Coinglass

Fuel for the rally includes consistent demand from US spot Bitcoin ETFs, which have seen over $7.4 billion in net inflows over the past five weeks. On top of that, firms like financial intelligence provider Strategy are increasing their exposure, while Indonesian fintech firm DigiAsia Corp has announced plans to raise $100 million to establish a corporate Bitcoin treasury reserve.

On the surface, the bull run appeared unstoppable.

Then the bond market struck

Just as sentiment was peaking, the US Treasury’s $16 billion 20-year bond auction on 21 May showed signs of strain. Investor demand was noticeably weak, with the high yield coming in at 5.047%, above the expected 5.035%. That seemingly small gap - a 1.2 basis point “tail” - was the largest since December and a clear warning sign in bond market terms.

Graph illustrating weak demand in the 21 May 2025 US 20-year Treasury bond auction, with yields spiking to 5.047% - the largest tail since December. — Source: Kobeissi Letter, X

The impact was immediate:

The S&P 500 fell by nearly 80 points within 30 minutes, dropping from 5,950 to 5,874.
Bond yields across the curve surged, with the 10-year yield hitting 4.586% and the 30-year rising to 5.067%.

Chart displaying a sharp rise in US Treasury yields on 21 May 2025, with the 10-year yield hitting 4.586% and the 30-year reaching 5.067% amid market unease. — Source: Kobeissi Letter

This wasn’t a technical blip - it signalled something deeper. Investors are growing uneasy about rising deficits, persistent inflation risks, and the possibility that the Federal Reserve will keep interest rates higher for longer.

Why this matters for Bitcoin prices

The crypto market doesn’t exist in isolation. It’s tightly linked to broader financial conditions. When bond yields rise sharply, it suggests money is becoming more expensive - and that typically spells trouble for speculative assets like Bitcoin.

Here’s what that means in practical terms:

Higher yields boost the US dollar → Bitcoin often moves inversely to the dollar.
Tighter financial conditions → reduce leverage and liquidity across all risk assets.
Risk-off sentiment → leads investors to rotate out of crypto into more traditional “safe haven” assets.

Even if Bitcoin’s fundamentals remain strong, psychology matters. When traders see cracks in the bond market, they become more cautious, and that caution can lead to selling.

The macro backdrop isn't helping Bitcoin

This bond market wobble didn’t appear out of nowhere. The US is dealing with a budget deficit running at 7% of GDP, stubborn inflation, and fresh trade war noise from President Trump, all of which raise the stakes.

The bond auction’s poor results effectively signaled that investors want a higher return for lending to the US government. That’s a red flag for global markets and a potential drag on Bitcoin’s momentum. As K33 Research noted, these macro pressures could bring more volatility, especially if upcoming crypto-focused events like Trump’s $TRUMP Gala fundraiser or VP JD Vance’s appearance at Bitcoin 2025 fall flat.

What crypto traders should be watching

This doesn’t necessarily mark the end of the bull run, but it’s a serious inflection point. Key signals to monitor now include:

US Treasury yields - especially at the 10- and 20-year points.
Inflation data and central bank commentary - to anticipate rate direction.
ETF inflows - slowing demand here would be a concern.
Bitcoin futures positioning - with open interest at record levels, volatility could spike quickly.

Bitcoin technical outlook: Further rally or reversal?

Bitcoin is still very much in a bullish trend. Institutions are coming in, ETFs are delivering inflows, and price action remains technically strong.

But this week’s bond market shock is a reminder that macro still matters. If yields continue rising and financial conditions tighten further, Bitcoin could lose altitude fast. For now, traders remain optimistic - but the rally is skating on thinner ice than it appears.

So the big question remains: is this just a wobble, or the start of something bigger? The next bond auction might tell us more.

At the time of writing, Bitcoin’s upside momentum is meeting some resistance, with a wick forming at the top of the up move. However, the volume tells a story of sellers not moving in with enough conviction which could lead to more upside. If sellers fail to force a reversal, buyers could struggle at the $112,000 price level that’s currently holding prices. If we see a slump, on the other hand, prices could find support floors at the $102,990 and $93,000 price levels.