Bitcoin Faces New Challenges with Institutional Retreat and Rising Yields

Bitcoin experienced a slight increase of 2% over the last week, but multiple market difficulties have emerged, making it hard for the cryptocurrency to maintain its growth. The reduced activity in spot exchange-traded funds (ETFs) is perceived as a signal of declining institutional interest. In parallel, a stagnant stablecoin supply hints at a reduction in new fiat inflows, reflecting a broader decline in enthusiasm within the cryptocurrency space.

Can Institutional Demand Recover?

Bitcoin, post its April 2024 halving, continues to produce 3.125 BTC per block with an average daily output of about 450 coins. However, Bitfinex has observed a stark decline in the “absorption rate,” a measure of institutional demand, plummeting from 5.3 in February to only 1.3 now. This rate drop signifies significant weakening in large-scale investor activities.

Bitfinex’s report underscores that while demand slightly surpasses miners’ new supply, the difference is marginal. Experts point out that, at this juncture, such demand can be classified as passive. Restoring substantial price hikes in Bitcoin will require persistent capital inflows similar to those witnessed at the tail end of 2024 and the start of 2025.

Bitfinex analysts wrote, “The current absorption rate of 1.3 places the market in a passive absorption band, where demand is only just exceeding miner supply.”

What Impact Will Rising U.S. Yields Have?

The escalating yields on U.S. Treasury bonds, including inflation-protected securities, are further discouraging cryptocurrency investments. The yield on the 10-year Treasury Inflation-Protected Security (TIPS) spiked recently due to geopolitical tensions, peaking at 2.12%, a high not seen since June 2025.

Higher real yields often divert capital from riskier, non-yield-generating assets. For Bitcoin, seen both as a risky tech asset and “digital gold,” this translates into a dual blow. Investors are increasingly pivoting towards assets that promise steady yields over speculative cryptocurrency ventures.

In their report, Bitfinex emphasized, “Unless the Federal Reserve cuts rates and liquidity rises, higher real yields are likely to drive significant capital outflows from non-yielding instruments such as Bitcoin.”

Current market trends predict sustained elevated real interest rates. This scenario may uphold the existing market dynamics and contribute to continued upward pressure on yields.

Michael J. Kramer, from Mott Capital Management, highlighted the rapid increase in the 10-year U.S. real yields. He noted a growing anticipation of financial tightening and mentioned how soaring oil prices are further straining financial conditions, presenting another challenge for risky assets.

Kramer stated, “As oil prices rise, financial conditions tighten, and this effect is expected to persist as long as oil continues its upward trend.”