Key Takeaways
- Bitcoin reached $112,000 amid rising Japanese bond yields.
- Japan's 30-year bond yield hit a record 3.185% on May 20.
- Analysts cite sovereign risk as a major driver behind Bitcoin's rally.
Bitcoin’s surge to a record high of $112,000 on May 22 may be driven less by geopolitical headlines and more by turmoil in Japan’s bond market, according to Bitwise’s European head of research, André Dragosch.
Rising Japanese bond yields
Dragosch pointed to a sharp increase in long-term Japanese government bond yields, which signaled rising investor concern about Japan’s fiscal health.
On May 20, the yield on 30-year Japanese bonds hit an all-time high of 3.185% before slipping slightly to 3.115% by May 23, TradingView data shows.
Japan’s debt concerns
This spike in yields reflects fears about Japan’s massive debt burden. With a debt-to-GDP ratio exceeding 250%, Japan far outpaces countries like Germany, which has a ratio of just 62%.
Despite this, both nations saw similar 30-year bond yields around 3.1% as of May 21, according to The Kobeissi Letter.
The fiscal debt doom loop
Dragosch explained:
Because yields are increasing, sustainability becomes more of an issue, meaning credit risk increases, meaning yields increase even more.
He warned this dynamic can lead to a…
… fiscal debt doom loop.
Bitcoin as a hedge against sovereign risk
Dragosch suggested that institutional investors may be viewing Bitcoin as a hedge against sovereign default risk.
He said:
Bitcoin is an immutable asset. It’s free of counterparty risk. It’s a hedge against sovereign risk and sovereign default.
US spot Bitcoin ETFs inflows
The comments come as US spot Bitcoin ETFs are nearing a record $6.49 billion in monthly inflows, with under $1.3 billion to go as of late May.
