The move marks a notable reversal from the start of the year, when the curve was steepening, a sign markets were pricing in rate cuts, which were then cited as a tailwind for risk assets including cryptocurrencies. That tailwind now looks like it’s fading.

Bonds serve as one of the channels through which monetary and fiscal policies are transmitted into markets and the economy. Hence, shifts in the bond market curve or spreads are often clearer and more reliable signals of impending policy changes than individual analyst commentary.

The two-year yield moves closely with expectations for near-term Fed policy, while the 10-year yield reflects where markets see growth and inflation over the longer haul.

Under normal conditions, the curve (the spread between the two) slopes upward as investors demand extra compensation, or a premium, to lock up their money for longer periods, pushing the 10-year yield above the two-year yield.

When that gap narrows, it usually means one of two things: investors are pricing in higher interest rates for longer, which keeps the two-year yield elevated, or they’re growing more pessimistic about long-term growth, which pulls the 10-year yield down.

Right now, the move looks like the former, especially in the wake of Wednesday’s Fed decision, in which the central bank held interest rates unchanged, but the broader messaging leaned hawkish.

While new Fed Chair Kevin Warsh said the committee remains dedicated to delivering price stability, the Fed’s updated dot plot pointed to higher rates ahead than previously projected. The median rate projection for 2026 climbed to 3.8% from 3.4% in March. For 2027, it rose to 3.6% from 3.1%, and for 2028, the projection moved to 3.4% from 3.1%.

The committee was notably split on the path forward. One member projected a rate cut, eight see rates holding steady, three expect one hike, five expect two hikes, and one projects three hikes.

Taken together, these signals suggest the path to a bull revival in BTC may be easier said than done and the cryptocurrency could remain under pressure for sometime. That would be broadly consistent with the widely discussed four-year halving cycle theory, which points to a potential bottom forming around October.