[Digital Today reporter Yoonseo Lee] Bitcoin posted its strongest third-quarter rise since 2017, but U.S. Treasury yields above 5 percent have emerged as a key variable for extending the rally.

Cointelegraph reported on Oct. 5 that research firm Delphi Digital said in a recent weekly report that bitcoin rose 43 percent in the third quarter, but high rates and surging Treasury yields are weighing on risk assets broadly.

Delphi Digital said it would not be easy for the upward momentum to continue even though bitcoin had risen for 3 consecutive weeks through last week. It said the Federal Reserve's September rate hike and Treasury yields that have risen to levels near multi-decade highs are acting as price resistance. It also said that if Treasuries offer risk-free returns above 5 percent, all risk assets must demonstrate greater appeal to attract funds.

In the market, some interpret bitcoin as benefiting in part from what is known as a "currency debasement trade" even in this rate environment. That means awareness that expanding government borrowing and monetary expansion could weaken the dollar's purchasing power is supporting demand for bitcoin. Vanessa Grellet (바네사 그렐렛), managing partner at crypto-focused venture capital firm Arche Capital, said the currency debasement trade does not necessarily require low interest rates, adding that investors are paying more attention to the federal fiscal deficit and rising government interest costs.

Bitcoin in fact climbed above $87,000 at one point last week before pulling back. Its gain since mid-August has exceeded 35 percent. At the time, the U.S. Treasury said it would double its purchases of 10-year and 20-year long-term bonds to support market liquidity, and some investors took it as a measure aimed at easing pressure in the bond market and lowering borrowing costs. The scale of long-term bond purchases was later expanded to about triple.

In the short term, there is also room for the rate burden to ease somewhat. U.S. nonfarm employment in September rose by only 29,000, far below the market forecast of 80,000. As another signal was added that the labor market is cooling, the likelihood that the Fed will raise rates again in October fell quickly.

There were also comments from within the Fed that there is no need to rush. John Williams (존 윌리엄스), president of the Federal Reserve Bank of New York and a voter this year on the Federal Open Market Committee, said in a speech last week that there was no need to move urgently after the policy action taken at the September meeting. As a result, the probability of an October rate hike reflected in the CME Group's FedWatch tool fell to about 24 percent. That is a sharp shift compared with more than 75 percent a week earlier.

Ultimately, the bitcoin market has entered a phase where 2 forces are operating at the same time. On one side, a slowdown in employment and the Fed's cautious stance are reducing concerns about additional tightening. On the other, Treasury yields in the 5 percent range are being maintained, constraining appetite for risk assets. In this situation, whether bitcoin extends further gains depends on the rate trend in the Treasury market and how much investment demand tied to dollar debasement holds up.