Rising government bond yields signal a coming “structural” shift that will create a Bitcoin “supercycle” of rising prices, as investors flee degrading assets for those that cannot be inflated, according to Shang Wu, senior research analyst at crypto exchange BitMEX.
The yield on the 30-year U.S. Treasury bond topped 5.14% on Tuesday, while the yield on the Bank of Japan’s 10-year government bond touched 2.8%, Wu said. said.
These returns are not sustainable in the long term and will force governments to choose between devalue their currencies and a “collapse of sovereign debt,” Wu said.
Bond yields on US and Japanese public debt from April 2024 to May 2026. Source: BitMEX
“Central banks are in a corner. They must choose between a collapse of sovereign debt and a devaluation of their currencies,” Wu said. According to the analyst:
“For Bitcoin, upcoming volatility will be chaotic in the short term, but it provides the ultimate structural tailwind for a long-term supercycle.”
The analysis comes as the American national debt exceeds 39,000 billion dollars, and growing geopolitical tensions threaten to increase public spending, while the ongoing war in Iran causes a soaring energy prices and a corresponding inflationary peak.
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Raising rates won’t solve the problem, it will just bankrupt the government
Central banks typically use higher yields to curb inflation by restricting access to credit; When borrowing costs are high, consumers and investors borrow less and asset prices fall.
However, the US national debt of $39 trillion, which continues to grow due to the budget deficit, makes it impossible to control inflation by raising interest rates, as higher rates would also increase the government’s debt servicing costs, Wu said.
A forecast of what the annual US budget would look like if bond yields rose to 7%. Source: BitMEX
“With a national debt of $39 trillion, keeping rates at these levels means the government’s annualized interest spending will soon consume the entire federal tax base,” according to the analyst.
Wu and others, including macroeconomist Lyn Alden, say the government and central banks will attempt to disguising quantitative easing adding liquidity through other methods such as yield curve control and unannounced purchases of US government debt.
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