Economic Factors That Could Drive Bitcoin’s Rise

Economic Factors That Could Drive Bitcoin’s Rise

Rising Government Bond Yields and Fiscal Pressures

Japan’s 30-year government bond yields surged to 3.2% on July 15, reaching unprecedented levels and intensifying concerns over the country’s fiscal stability. This sharp increase, driven by mounting debt and fiscal pressures, has resulted in an estimated 45% loss in bond value since 2019, according to The Kobeissi Letter. Japan’s debt-to-GDP ratio now stands at a staggering 235%, leaving the Bank of Japan with $198 billion in unrealized losses. These developments have fueled growing skepticism about the reliability of sovereign debt as a safe-haven asset, a sentiment that is increasingly resonating across global bond markets.

The erosion of confidence in government bonds is not confined to Japan. In the United States, 10-year Treasury yields have risen by 40 to 60 basis points this year, reflecting similar upward pressure. Since the lows of 2020, yields have more than quadrupled, driven by persistent deficit spending and heavy Treasury issuance. Liquidity in global government bond markets has now fallen below levels seen during the 2008 financial crisis, underscoring the mounting unease among investors.

Bitcoin as a Macro Hedge Amid Economic Uncertainty

In response to these fiscal strains, investors are increasingly turning to hard assets such as Bitcoin and gold. Javier Rodriguez-Alarcón, former BlackRock executive and XBTO Chief Investment Officer, told Decrypt that Bitcoin is “increasingly being treated as a macrohedge and structurally scarce asset.” He emphasized that the next phase of Bitcoin’s ascent will depend on deeper institutional interest, particularly as legislative, fiscal, and monetary factors begin to align in its favor.

Economic uncertainty and persistent inflation concerns are further enhancing Bitcoin’s appeal as a hedge. This is reflected in growing adoption, with spot ETF inflows for Bitcoin and Ethereum surpassing $3 billion and $1 billion, respectively. These trends are unfolding against a backdrop of elevated interest rates and cautious “just-in-case” financing strategies, especially in anticipation of potential U.S. tariffs under the Trump administration. Some analysts describe the U.S. economy as currently existing in a “goldilocks-like equilibrium,” a condition that has also contributed to Bitcoin’s recent rally.

Market data indicates that Bitcoin’s leverage has reached a yearly high, signaling a robust risk appetite among investors. Buyers are positioning themselves at 2%, 5%, and 10% below current market prices, demonstrating ongoing dip-buying interest despite recent price volatility. Historical patterns suggest that Bitcoin has responded positively to similar market signals in the past.

Risks and Market Dynamics

Despite these positive indicators, risks remain. Elevated speculative activity and significant unrealized profits could undermine the sustainability of Bitcoin’s rally. Traditional safe-haven assets such as gold continue to attract investor interest, and regulatory developments—particularly pro-crypto policies—are likely to play a decisive role in shaping Bitcoin’s future trajectory.

Bitcoin experienced a recent pullback, declining more than 5% from its July 14 record high of $123,300, with over $300 million in long positions liquidated within 12 hours, according to CoinGlass. Nevertheless, investor sentiment appears resilient. As fiscal and monetary uncertainties persist, Bitcoin’s role as a hedge and alternative asset is expected to remain a focal point for both institutional and retail investors.