A sustained rise in the 10-year U.S. Treasury yield toward 5.25% to 5.85% could force Washington into more aggressive debt-market intervention, potentially shifting pressure from government borrowing costs onto the dollar, according to Matt Cole, chief executive of asset manager Strive.
Cole’s argument places the Treasury market, rather than Bitcoin’s short-term price action, at the center of the next major macroeconomic test for digital assets. With the federal deficit running near $1.8 trillion, or roughly 6% of gross domestic product in the framework he described, higher long-term interest rates would raise mortgage costs, federal interest expenses and financing pressure across the economy.
The 10-year Treasury yield was cited at about 4.64%, already well above the range that dominated much of the post-2008 period. Cole does not describe 5.25% as an automatic trigger for intervention. Instead, he sees the 5.25%–5.85% range as the point where the political and financial consequences of higher yields could become difficult for policymakers to tolerate.
That scenario would leave officials facing an uncomfortable choice: accept higher long-term borrowing costs amid persistent deficits, or take steps aimed at absorbing Treasury supply and restraining yields. Cole expects the latter path could involve a weaker dollar if fiscal policy remains largely unchanged.
Deficits remain elevated despite a strong economy
Stanley Druckenmiller, the hedge fund manager and Duquesne Family Office chairman and chief executive, has made a similar case about the trajectory of U.S. government finances. Druckenmiller has argued that the fiscal position is unsustainable because deficits remain unusually large while employment conditions are relatively strong and inflation has not fully returned to the Federal Reserve’s target.
In his view, large deficits during periods of economic stress are easier to explain than deficits of this scale during near-full employment. The concern is that the government will enter the next recession, crisis or major spending shock with less fiscal capacity than it had in earlier cycles.
Druckenmiller has also pointed to entitlement spending, including Social Security and healthcare, as a major source of future budget pressure. Those programs carry broad political support, making structural spending changes difficult for either major political party to champion during an election campaign.
Cole framed the obstacle in similarly political terms. He said neither party has made entitlement reform a central election issue, leaving Treasury financing operations and Federal Reserve policy as more immediate tools for managing rising pressure in the bond market.
He also cited the Department of Government Efficiency, known as DOGE, as evidence of the limits of spending-cut initiatives. Cole’s assessment was that the effort did not materially alter the direction of federal borrowing and that deficits continued to widen.
The long end of the Treasury market faces particular strain
The concern is concentrated in longer-dated Treasuries, where yields reflect expectations for inflation, fiscal deficits, future borrowing and the compensation traders demand for holding debt over many years.
Cole noted that the Federal Reserve holds roughly $1.6 trillion of Treasury securities with more than 10 years remaining until maturity. He put that at about 28% of the outstanding Treasury market in that maturity range. Such a large official-sector position means the central bank’s decisions about reinvestment, balance-sheet reduction or renewed purchases can affect a relatively constrained part of the market.
The U.S. Treasury has also increased planned buybacks of 10- to 30-year debt, doubling the size of those operations while saying the program could be expanded. Treasury buybacks involve the government repurchasing existing securities, which can improve market liquidity and alter the available supply of specific maturities.
Cole argued that the increase showed official sensitivity to rising long-end yields, although he said the scale of the program was not large enough to reverse the broader trend on its own. Buybacks can smooth market functioning, but they do not eliminate the government’s underlying need to issue new debt to finance deficits.
A more forceful response, in Cole’s scenario, could include larger buybacks, greater issuance of short-term Treasury bills rather than longer-dated notes and bonds, use of the Treasury General Account, or an expansion of the Federal Reserve’s balance sheet. The latter would involve the Fed buying assets, potentially including Treasuries, with newly created central-bank reserves.
Such policies could reduce upward pressure on long-dated yields, though they would also invite questions about whether monetary policy is being used to accommodate fiscal deficits. The Federal Reserve has traditionally maintained that its asset purchases are intended to support monetary-policy goals and market functioning rather than directly finance government spending.
A weaker dollar is central to Cole’s scenario
Cole’s thesis is that restraining long-term yields without addressing the deficit would shift some adjustment into the currency. If markets conclude that nominal Treasury yields are being held below the level required to compensate for inflation and fiscal risks, the dollar could face selling pressure.
He said a move in the U.S. Dollar Index into the 60 to 70 range was possible, a level that would approach lows seen in the modern history of the index. The Dollar Index was cited near 98.9 in the material underlying his argument, far above that proposed range but below prior peaks.
Currency forecasts are inherently uncertain, particularly because the dollar’s value depends on relative conditions in Europe, Japan, China and other major economies as well as U.S. policy. Cole’s case rests on a specific combination of events: fiscal imbalances persist, long-term yields rise sharply, and policymakers respond by limiting those yields rather than pursuing broad spending reductions or revenue changes.
Bitcoin features prominently in that scenario because its issuance schedule does not change in response to fiscal conditions. Cole argued that a prolonged period of dollar weakness combined with yield management could increase interest in scarce assets, including Bitcoin.
He also contrasted Bitcoin’s fixed supply with sectors shaped by rapid advances in artificial intelligence. AI could increase the supply of certain products and services or erode corporate advantages in parts of the technology industry, Cole said, while Bitcoin’s maximum supply remains unchanged.
Bond-market stress would shape the timing
Druckenmiller’s appeal to “let the bond market speak” differs from a policy approach built around suppressing yields. Letting yields rise can impose discipline on fiscal policy by making borrowing visibly more expensive, but it can also spread rapidly through mortgages, corporate financing, equity valuations and government interest costs.
Cole expects those spillovers would become more severe if the 10-year yield enters his 5.25%–5.85% zone. A yield move of that size would not guarantee intervention, and any official response would depend on inflation, growth, Treasury-market liquidity and Federal Reserve policy at the time.
The supplied argument that a rate cap would automatically require large-scale money creation is too absolute. Treasury buybacks, changes in debt issuance and cash-management operations can affect market conditions without necessarily amounting to Federal Reserve bond purchases. A renewed expansion of the Fed’s balance sheet would be a more direct monetary response, but it would remain a policy decision rather than an automatic consequence of a higher 10-year yield.
For cryptocurrency markets, the practical takeaway is less a near-term trading signal than a macroeconomic threshold worth watching. Rising long-term Treasury yields would test whether U.S. policymakers accept tighter financial conditions or seek to contain them through debt-management and central-bank tools. Bitcoin’s role in Cole’s framework depends on which path they choose, and whether a response comes with sustained pressure on the dollar.
For deeper insight into policy, debt, and crypto, explore how fiscal policy works and shapes bitcoin’s macro outlook.
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