Rising Treasury Yields Trigger Selloff in Bitcoin (BTC) and Stock Markets

Key Takeaways

• Bitcoin (BTC) plunged from approximately $90,000 to close to $60,000 in early 2026, while equities remained resilient — but that’s changing.
• Following the outbreak of conflict with Iran on Feb. 28, Treasury yields have surged, pushing Nasdaq and S&P 500 futures down to September levels.
• The 10-year Treasury yield reached 4.41%, marking its highest point since August 1, climbing 48 basis points since hostilities began.
• Both cryptocurrency and stock market sentiment indicators have plunged into “extreme fear” zones during late March.
• Retail investor pessimism has reached 52% for the next six-month outlook — the most negative reading since May 2025.

Digital asset markets experienced severe turbulence at the beginning of 2026, with Bitcoin plummeting from approximately $90,000 to near $60,000 within a five-week period. During that same timeframe, U.S. equity markets showed remarkable resilience, hovering close to all-time peaks.

That divergence is rapidly disappearing — and not for positive reasons.

Since military operations involving Iran commenced on February 28, concerns about inflationary pressures and diminishing prospects for Federal Reserve interest rate reductions have driven U.S. Treasury yields significantly higher. This shift has started dragging equities downward, mirroring the weakness that bitcoin telegraphed several weeks ahead.

The benchmark 10-year U.S. Treasury note yield advanced to 4.41% during early Monday trading, marking its strongest level since the beginning of August. The yield has increased by 48 basis points from when the Iranian conflict initiated. Meanwhile, the two-year Treasury yield has surged 57 basis points to reach 3.94%.

Elevating yields carry significant implications because they increase borrowing expenses throughout the broader economy — affecting everything from home mortgages to business financing. This dynamic typically dampens enthusiasm for riskier assets in equity markets.

Nasdaq futures declined to 23,890 points during Monday’s early session, representing the weakest level since September 11. S&P 500 e-mini futures tumbled to 6,505 points, similarly marking their lowest position since September.

Bitcoin Functions as an Early Warning System

Market observers have consistently monitored bitcoin as a forward-looking gauge for overall risk sentiment. Its sharp decline during early 2026 may have served as an advance warning of the turbulence equities are currently facing.

In a recent analysis, Bloomberg Senior Commodity Strategist Mike McGlone highlighted that bitcoin occupies a position “at the top of the risk-assets iceberg,” suggesting its deteriorating price action could represent the initial phase of a broader market correction — especially if volatility in commodities spills over into stock indices.

Bitcoin has traded within a relatively narrow range in recent weeks, oscillating between $65,000 and $75,000. Monday morning prices hovered around $68,790. However, derivatives market indicators reveal profound anxiety, with an unprecedented skew toward put options — financial instruments designed to protect against additional price declines.

Anxiety Permeates Both Asset Classes

Measures of market sentiment indicate that fear has become pervasive. The Crypto Fear & Greed Index has retreated to “extreme fear” status. A comparable gauge tracking stock market sentiment has likewise experienced a sharp deterioration.

Blockchain analytics provider Alphractal characterizes this simultaneous emergence of fear across both markets as an uncommon occurrence, advising investors to maintain heightened vigilance.

Data from the American Association of Individual Investors reveals that 52% of retail market participants maintain a pessimistic view for the upcoming six months. This represents the most bearish sentiment registered since May 2025.

Donald Trump’s 48-hour deadline concerning the Strait of Hormuz continues ticking down, contributing additional uncertainty to market psychology.

Market analyst Tony Severino highlights a recurring historical phenomenon where bitcoin’s correlation with the S&P 500 declines to -0.5 before experiencing a dramatic reversal upward — a configuration he suggests frequently precedes significant equity market declines. That correlation metric has recently shifted back into positive territory.

“Typically there’s an initial rally that amplifies the subsequent pain,” Severino noted.

Current market pricing reflects a modest probability that the Federal Reserve might actually increase interest rates instead of implementing the anticipated cuts.