Weak US jobs data has narrowed expectations for another Fed hike in October, offering Bitcoin some relief as investors continue to embrace the debasement trade.

Bitcoin (BTC) is coming off its best third quarter since 2017, but extending the rally may prove more difficult as Treasury yields above 5% offer investors an increasingly attractive alternative to risk assets, according to Delphi Digital.

In its latest weekly newsletter, Delphi highlighted Bitcoin’s 43% gain in the third quarter, followed by a third straight weekly advance last week. However, “the grind higher is happening against real resistance,” Delphi wrote, pointing to the Federal Reserve’s September rate hike and surging Treasury yields, which have reached multi-decade highs.

“When a government bond pays over 5% risk-free, every risky asset has to work harder to deserve the money,” Delphi wrote.

Bitcoin has so far managed to overcome the hurdle, helped in part by growing interest in the so-called debasement trade, or the view that persistent government borrowing and currency expansion will erode the dollar’s purchasing power.

According to Vanessa Grellet, managing partner at crypto-focused venture firm Arche Capital, “the debasement trade doesn’t require low interest rates,” given investors’ growing focus on federal deficits and the government’s rising interest bill.

Against this backdrop, Bitcoin’s price briefly topped $87,000 last week before correcting lower. It has gained more than 35% since mid-August, shortly after the US Treasury announced plans to double its long-dated debt buybacks to support market liquidity, targeting 10- and 20-year notes. Some investors viewed the move as an effort to ease strains in the bond market and contain borrowing costs.

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