As the new year dawned, Bitcoin (BTC) enthusiasts found cause for celebration as the cryptocurrency edged toward the $100,000 milestone, rebounding from December’s subdued performance. This optimism was tempered by CoinDesk’s cautionary note, highlighting potential market corrections.

Indeed, the exuberance was short-lived. A week into January, Bitcoin retreated to $93,000, unable to sustain its position above the six-figure threshold. This decline coincided with heightened volatility in the U.S. Treasury market, where long-term yields reached multi-month peaks, spurred by persistent inflation indicators.

Notably, the real, inflation-adjusted yield on the 10-year U.S. Treasury security climbed to 2.29%, its highest since November 2023. Such attractive yields in fixed-income markets often diminish the allure of riskier assets like cryptocurrencies, especially when driven by anticipations of a hawkish Federal Reserve stance rather than robust economic growth.

This week, data underscoring stubborn inflation has led traders to postpone expectations of the next Fed rate cut to June. Thomas Erdosi, head of product at CF Benchmarks, observed that Bitcoin’s recent price dip mirrors the uptick in Treasury yields and the diminishing likelihood of imminent rate cuts, factors that adversely affect the short-term outlook for crypto assets, which typically thrive in more liquid environments.

This yield surge isn’t confined to the U.S.; major economies like Japan and the U.K. are experiencing similar trends, with the U.K.’s long-term yields reaching their highest since 1998. These developments have exerted pressure on global stock markets, with indices such as the Nasdaq and the S&P 500 surrendering their early-year gains.

Amid these macroeconomic uncertainties, a twist emerges: Bitcoin’s options market, particularly on Deribit, retains a bullish sentiment. Active call options total $14.87 billion, nearly double the value of active puts. The $120,000 strike call option is notably popular, with a notional open interest of $1.47 billion, indicating that some investors remain optimistic about Bitcoin’s potential ascent.

Erdosi suggests that market dynamics could shift by month’s end. The inauguration of President Trump on January 20 is anticipated to usher in a more crypto-friendly regulatory environment, potentially influencing market sentiment favorably.

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