Written by: White55, Mars Finance
On May 20, 2025, an eye-catching red number flashed on the electronic screen in the Tokyo Bond Trading Hall - the yield of Japan's 40-year government bond broke through 3.5%, reaching a historical high. This figure was only 0.25% seven years ago, and just 1.3% two years ago, but now has soared like a rocket.
Almost at the same time, the Bitcoin price on global cryptocurrency exchanges broke through $112,000, setting a historical record.
The safest hedging asset in the traditional financial system and the most controversial new asset formed a dramatic mirroring relationship at this moment: the surge in government bond yields reveals the shaking of sovereign credit foundations, while Bitcoin's surge demonstrates its value recognition as a hedging tool.
Japanese Government Bonds: The Takeoff Point of a Black Swan
The Japanese government bond market is staging an epic trust crisis. In May 2025, Japan's 40-year government bond yield broke through the historical high of 3.5%, and the 30-year government bond yield also soared to its highest level since 2004. Bond yield and price are inversely proportional, and the surge in yield means a sharp drop in bond prices, with investors voting with their feet to abandon what was once considered the safest debt market globally.
The core of Japan's debt problem lies in the fundamental imbalance between its debt scale and debt repayment capacity. Japan's debt-to-GDP ratio has exceeded 250%, far surpassing Germany's 62%, yet maintaining a similar bond yield level.
Figure 1: Yield of 30-year government bonds at the London Stock Exchange.
This abnormal market pricing stems from the Bank of Japan's ultra-loose monetary policy suppression for decades. As inflation in Japan continues to heat up, the central bank is forced to abandon the yield curve control policy, and long-suppressed market forces erupt like a volcano.
Bond auction data reveals the severity of the crisis. The government bond auction in May 2025 encountered a cliff-like drop in demand, pushing yields to further climb. The weak auction results form a vicious cycle with economic slowdown: economic downturn forces the government to expand bond issuance, increased bond supply lowers prices and raises yields, and rising yields further burden government debt repayment, dragging down the economy.
The turmoil in the Japanese government bond market quickly spread to global financial markets. On May 25, 2025, Bitcoin price dropped 1.2% to $67,500 after the yield surge, S&P 500 futures fell 0.7%, and the Nasdaq index, dominated by tech stocks, dropped 0.9%.
The traditional safe-haven asset gold, however, rose against the trend, with the stablecoin token PAXG price rising 0.5%. Global capital is re-evaluating risks, and a sovereign debt trust crisis triggered by Japan has begun to unfold.
Bitcoin: The Rise of a New Hedging Logic
When traditional safe-haven assets themselves fall into crisis, Bitcoin's anti-risk narrative is being redefined. From "digital gold" to "sovereign risk hedging tool", Bitcoin's role evolution reflects the expansion of deep cracks in the traditional financial system.
Bitwise Europe Research Director André Dragosch pointedly stated: "Bitcoin is an unalterable asset. It has no counterparty risk. It can hedge sovereign risk and sovereign default risk." This statement precisely summarizes Bitcoin's core value proposition in the new financial environment.
The logic chain of sovereign risk hedging is clear: when the debt sustainability of countries like Japan is questioned → government bond yields surge → government debt repayment capacity further deteriorates → forming a "fiscal debt vicious cycle" → investors seek reserve assets disconnected from sovereign credit.
In this context, Bitcoin's unique attributes - fixed supply of 21 million, decentralized network, no issuing entity - perfectly fill the hedging void left by the collapse of traditional government bonds.
Market data validates this logical transformation. In January 2025, Bitcoin spot ETF monthly inflows reached $4.94 billion, setting a historical record. On April 22, the US Bitcoin spot ETF had a single-day inflow of $912 million, over 500 times the daily average in 2025.
Figure 2: Recent BTC/USD trend chart.
Institutional funds are flowing into the Bitcoin market at an unprecedented speed, with BlackRock's IBIT ETF alone holding 582,870 Bitcoins, surpassing all other competitors.
At the national level, actions are also being taken. Czech National Bank Governor Aleš Michl announced plans to diversify reserves to Bitcoin. The Trump administration proposed the concept of establishing a "strategic Bitcoin reserve", and if this plan materializes, Bitcoin will transform from an investment tool to a national strategic asset.
Bitcoin is experiencing a qualitative change from a marginal speculative asset to a mainstream hedging tool.
Macro Shift: Three Engines Driving BTC Value Reassessment
Behind Bitcoin breaking its historical high point is a profound reconstruction of the global macroeconomic landscape. Three engines are jointly driving Bitcoin's value reassessment:
The Federal Reserve's monetary policy and inflation tug-of-war dominate market sentiment. Although the Fed has cumulatively cut rates by 100 basis points in 2024, it paused rate cuts in early 2025 due to inflation rebound. The Trump administration's policy of imposing 25% tariffs on imported goods further pushes up inflation expectations, weakening the US dollar's purchasing power.
Under the double squeeze of high inflation and high interest rates, Bitcoin's attractiveness as an anti-inflation asset has significantly increased.
Bitunix Research Institute analysis points out: "Against the backdrop of global economic instability, market demand for anti-inflation assets (such as Bitcoin) may increase, and Bitcoin's positioning as 'digital gold' will be further consolidated".
Geopolitical risks and policy shifts become key variables. In February 2025, Trump's tariffs on imported goods from multiple countries triggered global market turbulence, causing Bitcoin to plummet 17.5%. Dramatically, the Trump administration's pro-crypto policy expectations have injected new momentum into Bitcoin.
If the White House's plan to include Bitcoin in strategic reserves is realized, it will reshape Bitcoin's positioning in the global financial system. The policy shift allows Bitcoin to benefit from both hedging demand and institutional acceptance.
Technology adoption and on-chain activities provide fundamental support. Bitcoin ecology ushered in major upgrades in 2025: Layer2 solutions improved transaction speed, reduced transaction costs, and Web3 application user volume broke through 50 million.
Glassnode on-chain data shows that Bitcoin on-chain transaction volume in May 2025 increased by 30% year-on-year, and the number of addresses holding over 1,000 BTC increased by 15%. Technological evolution and adoption rate increase add pragmatic support to Bitcoin's value storage narrative.
Institutional Actions: ETF Rewrites Market Structure
The approval and listing of Bitcoin spot ETFs have completely rewritten the market structure, paving a highway for traditional capital to enter the cryptocurrency field. In January 2025, Bitcoin spot ETF monthly inflows reached $4.94 billion, a 226.67% increase compared to the same period last year.
As of April 2025, the 11 US Bitcoin spot ETFs held 1.1 million Bitcoins, accounting for 5.5% of circulating supply, becoming the most important marginal buyer in the market.
Figure 3: Net flow chart of US spot ETFs.
ETF traffic data has become a leading indicator for Bitcoin prices. On April 22, 2025, Bitcoin ETF saw a single-day inflow of $912 million, driving BTC/USD to a six-week high.
Bloomberg analyst Eric Balchunas described the Bitcoin ETF inflow that day as entering "Pac-Man mode", with most products in the 11 ETFs seeing increased capital inflows, breaking BlackRock's IBIT's monopoly.
Andre Dragosh, European Research Director at asset management company Bitwise, noted: "Since January 2024, ETFs have become the 'marginal buyer' of Bitcoin, effectively determining whether Bitcoin spot exchanges show net buying or net selling."
This structural change has significantly enhanced Bitcoin's price stability.
Institutional holdings are showing a trend of concentration. By early 2025, BlackRock's IBIT held 582,870 Bitcoins, Fidelity's FBTC held 205,510, and ARK 21Shares Bitcoin ETF held about 100,000.
The three major ETF institutions collectively hold nearly 900,000 Bitcoins, accounting for over 80% of total ETF holdings. This highly concentrated holding structure gives top institutions enormous market influence and brings the risk of market volatility from single large holders.
On-chain data shows that in May 2025, Bitcoin outflows from exchanges to cold wallets increased by 10%, indicating investors choosing long-term holding strategies amid uncertainty. Addresses holding over 1,000 BTC saw a 15% decrease in activity, reflecting institutional caution during yield volatility. These behavioral changes are reshaping Bitcoin's market liquidity structure.
Financial Paradigm Reconstruction
National strategic reserve libraries now store not just gold and US dollars, but also a string of crypto keys - the Czech Central Bank announced the inclusion of Bitcoin in reserves, the Trump administration is considering establishing a "strategic Bitcoin reserve", and BlackRock's Bitcoin ETF holdings have exceeded 550,000.
The latest Wall Street Journal survey shows over 60% of institutional investors now view Bitcoin as a "new type of government bond" for hedging sovereign credit risk. When Japan's 40-year bond yield broke 3.5%, global capital did not rush to traditional safe havens but chose the new asset coded as BTC.
The underlying logic of the global financial system is being rewritten, with Bitcoin's increased recognition as a tool for hedging sovereign risk representing not just a victory for cryptocurrency, but a major vote of confidence against the traditional financial system.
