Bitcoin’s recent price surge may be linked to instability in Japan’s bond market, as investors seek alternatives amid rising financial uncertainty.
According to Bitwise’s European head of research, the recent global de-risking may not have contributed as much to Bitcoin’s surge to $112,000 as the turbulence in the Japanese bond market.
The latest all-time high of Bitcoin might be related to persistent problems in the Japanese bond market, which could indicate that BTC is becoming more widely accepted as a hedge against volatility in the conventional financial system (TradFi).
According to Cointelegraph data, the price of Bitcoin, which is currently trading at $109,661, reached a new all-time high of $112,000 on May 22 before retreating to trade above $109,700 at the time of writing on May 26.
Although some ascribed the surge to geopolitical events, such as US President Donald Trump’s May 19 declaration of peace negotiations between Russia and Ukraine, market analysts believe macroeconomic considerations are more important.
Japan’s bonds hit a record yield.
André Dragosch, head of European research at Bitwise, highlighted a rise in long-term bond yields in Japan as evidence of growing apprehension over the country’s sovereign credit outlook.
According to TradingView statistics, on May 20, 2025, the 30-year yield on Japanese bonds hit a new all-time high of 3.185% before falling to 3.115% on May 23.
Generally speaking, government bonds are regarded as haven investments. However, a significant yield increase frequently indicates investor apprehension regarding repayment risk and fiscal sustainability. Even though Germany’s debt-to-GDP ratio is 62% and Japan’s is over 250%, on May 21, according to The Kobeissi Letter, both nations’ 30-year bond yields were close to 3.1%.
“As yields rise, sustainability becomes a bigger concern, which raises credit risk and yields even further,” Dragosch stated. “Therefore, you find yourself in a fiscal debt doomsday situation.”
According to Dragosch, some institutional investors may be reevaluating Bitcoin’s suitability as a hedge against sovereign default risk in light of the rising volatility in the Japanese bond market.
Dragosch said, “This is now affecting other bond markets, especially the US Treasury market.”
Bitcoin’s attractiveness is driven by sovereign risk.
According to Dragosch, the volatility of the Japanese bond market increases concerns about sovereign credit risk, which in turn causes more people to use Bitcoin.
“Bitcoin is an immutable asset. It’s free of counterparty risk. It’s a hedge against sovereign risk and sovereign default.”
“Are rates still climbing when perceived default risk is still growing?” Dragosch stated that this serves as a rough benchmark for why Bitcoin could be heading toward $200,000, adding that this projection still depends on companies and exchange-traded fund (ETF) investors continuing to accumulate Bitcoin.
Less than $1.3 billion separates the US-listed Bitcoin ETFs from breaking the record of $6.49 billion in monthly inflows set for November 2024.
