Dollar Weak While Long-Term Bond Yields Are Rising, Is the time to invest in Bitcoin?
- Charles K
- 4월 21일
- 3분 분량
A very curious phenomenon has been unfolding in recent financial markets: U.S. long-term bond yields are rising, but the dollar is weakening. This contradicts conventional wisdom. Normally, higher interest rates mean higher value of money—so when long-term yields go up, the dollar should strengthen.
But now, that pattern appears to have broken. Why?
1. Why 10-Year Bond Yields Are Rising: Inflation Concerns
As the graph above shows, in April, the dollar and 10-year yields have been moving in opposite directions. To understand this, consider when long-term yields typically rise. They reflect long-term expectations for inflation and growth.
In this context, we can’t ignore the role of former President Trump's policies. The market fears both inflation and a potential recession as a result of his aggressive tariff strategies. This dual fear has pushed long-term rates higher, reflecting the belief that inflation won’t fall easily. The more intense the tariff disputes with China and other nations, the more likely long-term bond yields will rise.
2. Why Short-Term Rates Are Falling: Recession Fears
At the same time, recession fears are growing—and they are more immediate. As global counterparts respond quickly with retaliatory tariffs and countermeasures, corporations around the world could be hit harder and faster than expected.
The faster these tariffs are implemented, the sooner a recession could begin. That means the Fed may be pressured to cut rates quickly—leading to falling short-term yields.
1-Year Rate vs 10-Year Bond RateIn short, despite inflation pressure, the market increasingly expects the Fed to cut interest rates. This reflects rising political pressure to stimulate the economy.
But beyond the U.S., let’s also consider global conditions—starting with Japan.
✅ Summary: Long-term yields are rising due to inflation expectations, while short-term yields are falling on recession fears.
3. Why the Dollar Is Weak: Foreign Currency Strength & Global Liquidity Dynamics
Japan’s inflation is breaking through decades of deflation. At the same time, Japan is in trade talks with the U.S., which is pushing for yen appreciation. Japan already needs a stronger yen to contain inflation, and now it has added pressure from the U.S.—so the yen strengthens.
As a result, its counterpart—the dollar—weakens.
Europe is seeing a similar story. While the U.S. economy shakes, Europe is injecting liquidity to support growth. Capital flows into Europe, strengthening the euro—and once again, weakening the dollar.
So even amid inflation, multiple factors are dragging the dollar lower.
4. Why Risk Assets Like Bitcoin Are Rising
Why are Bitcoin and other risk assets rallying in this complex environment? Because the same factors above justify their strength.
As mentioned in a related blog post, the U.S. is racing to form trade alliances and wage tariff wars against China. This requires swift cooperation with allies like South Korea, Japan, Europe, and India—indicating that trade agreements may be imminent.
That means uncertainty would be reduced, and that’s a bullish signal for risk assets.
Meanwhile, with recession fears mounting, the Fed is expected to cut rates, and the dollar continues weakening. Liquidity-sensitive assets like Bitcoin and altcoins have responded positively.
Moreover, the U.S. is quietly floating the idea of tax cuts—another liquidity injection. If the recession signal strengthens, Trump may very well use this card to stimulate the market.
Final Thoughts: An Era of Signal Chaos—And Strategic Opportunity
The current market is entangled in a rare mix of inflation pressure and recession fears.
In the short term, risk assets may benefit.
In the long term, this may be the time for portfolio rebalancing, favoring cash positions.
If you are a long-term investor, now might be the time to reassess the value of holding cash.Of course, if you're already holding cash, it may not yet be time to deploy it. Patience could deliver better returns in this unusually complex market environment.
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