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More and more macro analysts are of the opinion that Bitcoin is the sole asset that can supplant the standard central-bank playbook of using higher interest rates to control inflation, given the disintegration of Japan's bond market and 30-year US Treasury rates at 19-year highs.
Creating a big splash, the bond market is acting in a way it hasn't for a while.
This past month, the 30-year US Treasury yield hit a new high, surpassing 5.14%, which was the previous record set in 2007.
At 2.78%, the yield on Japan's 10-year government bonds hit a level not seen in 30 years, making it one of the most stable global assets.
Just recently, Japan's 30-year yield hit 3.92%, which is a record high since the series started in 1999.
These are not typical fluctuations in the market.
A senior research analyst at cryptocurrency exchange BitMEX, Shang Wu, has likened the current state of the global bond market to the dramatic collision of two enormous tectonic plates.
Bitcoin is built to withstand such volatility, whereas governments will be forced into a difficult position with no clear solution.
"Central banks are backed into a corner. They must choose between a sovereign debt collapse and debasing their currencies. For Bitcoin, the upcoming volatility will be chaotic in the short term, but it serves as the ultimate structural tailwind for a long-term supercycle," said Shang Wu, Senior Research Analyst, BitMEX
The Trap is Mathematical, Not Political
Inflation in the US economy is being driven by rising oil costs caused by the continuing conflict in Iran and the return of deficit pressures that were previously subdued.
As a usual response, the central bank would likely raise interest rates.
Reduced excess liquidity in the financial system, lowered asset values, and reduced consumer expenditure are all effects of rising borrowing costs.
It worked well in 1979. By 2026, it will have served its purpose.
The data provides the necessary context. The United States now has a national debt that is more than $39 trillion.
The annual interest payments on that debt are quickly reaching a number that may potentially consume all of the federal tax income at the current yield levels.
Each incremental basis point of yield tightening implemented by the Fed to combat inflation concurrently exacerbates the fiscal challenges that the Treasury faces.
The solution is the problem.
Analyzing the figures: Should 30-year yields climb to 7%, a historical benchmark in the US, the yearly interest obligation on $39 trillion in existing debt would surpass $2.7 trillion, overshadowing current estimates for defense, Social Security, and discretionary expenditures combined.
BitMEX simulations suggest that, barring action, the threshold poses more of a destination risk than a tail risk.
"With the national debt at $39 trillion, keeping rates at these levels means the annualized interest expense of the government will soon consume the entire federal tax base," noted Wu.
That is to say, the central bank will not be able to get out of this jam by raising its profile.
With Brent crude hovering over $97 due to Iranian supply concerns and core price pressures remaining consistently high, any reduction would mean giving up any chance of regulating inflation.
Japan Adds a Second Fault Line
The simultaneous volatility in the Japanese bond market is what distinguishes this moment from other occurrences of fiscal anxiety in the US.
A combination of deflationary forces and the Bank of Japan's forceful yield curve management tactics has kept rates on Japanese government bonds historically low, making them a worldwide standard for low yields.
We can't go forward with that anchor.
The fact that the 30-year yield in Japan has increased to 3.92 percent is news that affects more than simply Japan.
In their duration portfolios, Japanese institutional investors, such as pension funds, regional banks, and life insurance, own large amounts of US Treasuries.
The allure of dollar-denominated bonds is dwindling due to rising Japanese rates, which is turning the tables on the yen carry trade.
This trade has been important in maintaining cheap global liquidity for years.
A lot of the money that flooded into US risk assets is starting to make its way back home.
Rising gasoline prices for Japanese consumers are a direct result of the oil crisis involving Iran, and Prime Minister Sanae Takaichi's government has added fuel to the fire by hinting at plans for a supplementary budget to help alleviate this load.
The bond market is already experiencing pressure, and this action adds to that by injecting more fiscal supply.
Just as the Federal Reserve is currently facing a number of obstacles, the Bank of Japan is now presented with a number of inconsistencies as it begins to gradually withdraw from its exceedingly accommodating attitude.
The Hidden Liquidity Play
According to macroeconomist Lyn Alden and Wu, who have been heavily cited by institutions for their research on fiscal supremacy, central banks would not respond with direct QE. That word is now quite divisive politically.
On the contrary, they expect policymakers to employ a variety of changes to regulations, such as an exemption from bank leverage that lets financial institutions take on Treasury supply without affecting capital requirements, the disguise of "market functioning" to manage the yield curve, and the unexpected repurchase of government debt.
They argue that the effect is monetaryally comparable to printing additional money, but with a more enticing presentation.
In this setting, assets without an issuer and with established supply schedules have a distinct value that is not affected by temporary changes.
"The current spike in long-term yields is a structural repricing of global sovereign risk. It is not a random market fluctuation," said BitMEX Alpha Research, May 2026.
Bitcoin's Uncomfortable Present
Bitcoin is still not an easy asset to hold onto for the near future because of all of this.
As of Wednesday, the asset's value was about $76,610, down from $77,200 at the start of the week and 11% below its all-time high of $126,198 in October 2025.
Prior to regaining its previous level, it dropped to $74,500, its lowest point in two months.
Six consecutive sessions have seen net withdrawals from Bitcoin ETFs, bringing the total for 2026 to a worrisome $536 million.
When compared to the unprecedented levels of institutional investment saw in 2025, this is a considerable decline.
It has been claimed that during the first quarter, Jane Street cut its Bitcoin ETF exposure by almost 70%.
About 10% of Goldman Sachs' holdings were diluted.
The 30-day apparent demand is at a record low of around minus 147,000 BTC, according to CryptoQuant statistics.
Traders would say the short-term structure is not encouraging.
As of May 22, the number of wallets containing 1,000 or more BTC has reached 1,282, aligning with the peak observed this year.
The strategy's average cost basis of $75,700 established a clear support level that remained intact during testing.
Onchain supply metrics are currently at their lowest levels in seven years.
The difference between institutional profit-taking within the ETF structure and accumulation at the chain level is, for those who support the supercycle theory, precisely what the bottom of a structural re-rating appears to be before it occurs.
The Political Pressure Cooker
There is more at stake than just cold, hard figures in the bond market.
This week, a high-ranking White House official said that staff members are quite worried about the future of gasoline prices and yield trends; with the midterm elections in November quickly approaching, fuel prices have become the most important political issue.
Mortgage rates, credit card costs, and the cost of business loans are all directly affected by increased yields.
Not only that, but they complicate matters further for Trump's demands for massive domestic spending just as Republican congressional leaders are starting to worry about losing their tenuous majority in the House and Senate.
To prevent inflation expectations from becoming entrenched, Federal Reserve officials have been discussing internally the possibility of needing to raise interest rates rather than the cuts proposed by Trump.
The fiscal fall that underpins the general theory of economic cycles would be expedited if that conversation were to become a statutory guideline, since it would indicate yet another tightening of the financial strains associated with debt payment.
The 'Raoul Pal' Version
Wu is not the only one with this perspective.
This month, Real Vision CEO and macro strategist Raoul Pal said that the chances of a Bitcoin supercycle had risen significantly.
Debt monetization pressures, a significant increase in global capital expenditure driven by investments in AI infrastructure, and fundamental shifts in the way sovereign balance sheets are managed were among the concerns he emphasized.
Even while Pal has always shown $450,000 per BTC as a possible result rather than a prediction, that is the price objective he has set for the supercycle scenario.
As the asset's liquidity rises through indirect routes, its price has traditionally surged significantly.
This transmission mechanism is illustrated by Bitcoin's connection with global M2, which hovers around 90%.
The outlook for the immediate future is unclear.
Brent crude prices have dropped to below $97 a barrel from their recent heights, and a possible deal to open the Strait of Hormuz has the potential to reduce inflation expectations, which might lead yields to recede and give traditional policy tools more time to work.
There are still major dangers associated with worries about Iran. We will attentively observe the upcoming May 26, 27, and 28 treasury auctions to gauge demand.
When auctions aren't very good, yields go up, which makes people less willing to take risks, which means more money is leaving exchange-traded funds.
It is quite improbable that the expected supercycle, should it materialize, would behave like any other supercycle on its way up.
At first, it will look like a confusing and unpredictable battle impacted by larger economic forces, with seemingly contradictory market movements and underlying logic.
The change will only be beneficial to those who understood the idea before it became popular.
A scenario where 30-year US rates hit 7% was also highlighted in BitMEX's study, along with the possible ramifications for the government budget in that difficult position.
Almost all other types of spending, both required and optional, would pale in comparison to interest payments.
Bitcoin bulls are relying on a policy reaction in this scenario, which is why it is not the basic case but rather the limiting condition that renders the present trajectory fundamentally impossible.
