According to Shang Wu, senior research analyst at cryptocurrency exchange BitMEX, rising government bond yields signal a coming “structural” change that will create a “supercycle” of rising Bitcoin prices as investors flee from lowering asset values ​​in favor of ones that cannot be inflated.

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 Treasury bond reached 2.8%, Wu he said.

These yields are unsustainable in the long term and will force governments to choose between depreciating their currencies or “a collapse of public debt,” Wu said.

US and Japanese Treasury bond yields from April 2024 to May 2026. Source: BitMEX

“Central banks are backed into a corner. They have to choose between the collapse of public debt or the depreciation of their currencies,” Wu said. According to the analyst:

“For Bitcoin, the coming volatility will be chaotic in the short term, but it serves as the final structural tailwind for a long-term supercycle.”

The analysis shows that he is a US citizen debt exceeds $39 trillion, and rising geopolitical tensions threaten to escalate government spending, while the ongoing war in Iran is causing energy prices to soar and a corresponding spike in inflation.

Related: Bitcoin rebounds as Trump prepares to announce a “negotiated” deal with Iran

An escalate in rates will not solve the problem, but will only lead to the bankruptcy of the government

Central banks typically employ higher yields to tamp down inflation by restricting access to credit; when borrowing costs are high, consumers and investors borrow less and asset prices fall.

However, the $39 trillion U.S. national debt, which continues to grow due to deficit spending, makes it impossible to control inflation by raising interest rates because higher rates would also escalate the government’s debt servicing costs, Wu said.

A forecast of what the annual U.S. 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 that the government’s annual interest spending will soon consume the entire federal tax base,” the analyst says.

Wu and others, including macroeconomist Lyn Alden, say the government and central banks will try to disguise quantitative easing by increasing liquidity through other methods such as yield curve control and unannounced purchases of U.S. government debt.

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