Crypto Market Shakes as U.S. Treasury Yields Keep Rising

• Bitcoin lost value as people moved cash into safer bonds after a U.S. credit warning. 
• The market showed signs of fear as yields made borrowing and spending more costly.
• Crypto volumes surged on fear, but prices slumped as investors exited risky positions.

Bitcoin dropped to $102,885 on Monday, May 19, 2025, after the U.S. 30-year Treasury yield surged to 5.02%, its highest since November 2023, according to CoinMarketCap. The drop reflects increased caution as investors react to Moody’s downgrade of the U.S. credit rating from Aaa to Aa1, citing long-term fiscal instability. Simultaneously, the 10-year Treasury yield rose 10 basis points, reaching 4.5%, further heightening pressure on risk-sensitive markets such as cryptocurrencies. 

The cryptocurrency’s 0.95% decline coincides with a broader dip in the global market. Bitcoin’s market cap currently sits at $2.04 trillion, while its 24-hour trading volume spiked 88.45% to $64.33 billion, showing heightened investor activity. A notable price peak above $106,000 occurred around 3:00 AM before reversing as investor sentiment cooled in response to macroeconomic news.

Besides Bitcoin, the entire crypto market experienced a pullback. Total cryptocurrency market capitalization fell 1.74% to around $3.25 trillion, with trading volume dropping 1.48% to $149.74 billion. Bitcoin dominance increased by 0.46%, climbing to 62.93%, suggesting capital rotation into the leading asset amid risk aversion. These shifts reflect the growing appeal of stable government bonds over volatile digital assets.

Credit Downgrade Sparks Market Volatility

Moody’s credit downgrade marks a pivotal moment for financial markets. The agency cited persistent U.S. fiscal deficits and a rising federal debt-to-GDP ratio. Projections show this ratio climbing from 98% in 2024 to 135% by 2035, elevating long-term risk perceptions.

The downgrade follows President Donald Trump’s recently enacted tax cuts, expected to add $5.2 trillion to the federal deficit within a decade. This policy shift has stoked concerns over fiscal sustainability, and market reactions have been swift. U.S. bond markets faced broad sell-offs, pushing long-term yields to levels unseen since late 2023.

According to Deutsche Bank’s Jim Reid, if these yields persist, they will exceed the peak levels seen during last year’s Liberation Day. Consequently, equity futures also turned red, with both SP 500 and Nasdaq contracts falling more than 1% in early trading, underscoring market-wide risk repricing.

Related: Trump’s First 100 Days Rock Crypto and Global Markets

Cryptocurrency Market Reacts to Tightening Conditions

Bitcoin’s fall is an indication that investors pay more attention to the wider economy. The increases in Treasury yields have typically made the prices of cryptocurrencies like Ethereum and Bitcoin fall. With long-term rates rising this week, it means the financial environment is becoming less favorable for speculative investments.

Institutional investors, in search of fairly safe investments, tend to choose government bonds due to their higher yields. Decreased demand for digital assets causes cryptocurrencies to be more volatile. Bitcoin’s fall from over $106,000 reinforces that everything is not well.

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