Delphi Digital stated in its weekly review that US Treasury yields above 5% are threatening the continuation of the Bitcoin rally: BTC gained 43% in the third quarter, while the market's estimated probability of a Fed rate hike in October fell to 24% after weak employment data.

Yields at multi-year highs increase resistance for BTC

According to Delphi Digital, "the rally is facing real resistance": the Fed's rate hike in September and the surge in Treasury yields to multi-year highs make risk-free yields above 5% a more attractive alternative to risk assets. "When a government bond pays over 5% with no risk, every risk asset has to work harder to earn investors' money," the firm noted.

Dollar debasement trade supported gains, BTC topped $87,000

Despite the pressure from yields, interest in the so-called debasement trade—expectations that deficits and monetary expansion undermine the dollar—supported Bitcoin. "The debasement trade does not require low rates," said Arche Capital managing partner Vanessa Grelle. Last week, BTC briefly traded above $87,000; since mid-August, the asset has gained more than 35%.

Weak employment: +29,000 jobs in September, rate hike odds at 24%

The US economy added just 29,000 jobs in September, reinforcing signs of a cooling labor market and reducing the likelihood of another rate hike in October. New York Fed President John Williams said there is "no need to rush" after the September decision. The CME Group's FedWatch tool puts the odds of an October hike at about 24%, down from over 75% a week earlier.

US Treasury expands long-term bond buybacks

Since mid-August, BTC's rise has coincided with the US Treasury's announcement of plans to double buybacks of long-term debt to support market liquidity, focusing on 10- and 20-year notes. Later, the buyback volumes were tripled, which some investors saw as a measure to ease bond market tensions and contain borrowing costs.