Bitcoin's (BTC) recent all-time high may be linked to ongoing issues in the Japanese bond market

Bitcoin's (BTC) price rose to a new all-time high of $112,000 on May 22, before retracing to change hands above $109,700 at the time of writing on May 26.

Recently, Bitcoin's price reached a new all-time high of $112,000 on May 22, before pulling back to trade above $109,700 at the time of writing on May 26, according to CoinTelegraph data.

While some linked the cryptocurrency's rally to geopolitical developments, including US President Donald Trump's announcement of Russia-Ukraine ceasefire talks on May 19, macroeconomic factors appear to be playing a larger role, according to market analysts.

As the 30-year yield on Japanese bonds hit a record high

Bitwise's head of European research, André Dragosch, is attributing Bitcoin's recent all-time high to ongoing issues in the Japanese bond market, which may be signaling Bitcoin's increasing recognition as a hedge against instability in the traditional financial (TradFi) system.

Dragosch pointed to growing concerns around Japan’s sovereign credit outlook, highlighting a spike in the country’s long-term bond yields.

The 30-year yield on Japanese bonds reached a new all-time high of 3.185% on May 20, 2025, before pulling back to 3.115% on May 23, TradingView data shows.

Government bonds are typically considered safe-haven assets. But when yields rise sharply, it often signals investor concerns about fiscal sustainability and repayment risk. Japan’s debt-to-GDP ratio stands above 250%, compared to Germany’s 62%, yet both nations had 30-year bond yields close to 3.1% on May 21, noted The Kobeissi Letter.

“Because yields are increasing, sustainability becomes more of an issue, meaning credit risk increases, meaning yields increase even more. And so you end up in this kind of fiscal debt doom loop.”

Dragosch said the escalating volatility in Japan’s bond market could be prompting some institutional investors to reconsider Bitcoin’s role as a hedge against sovereign default risk.

“This is now affecting other bond markets, especially the US Treasury market.”

Sovereign risk drives crypto appeal

Japan's bond market instability is fueling concerns over sovereign credit risk, pushing TradFi participants to invest more in Bitcoin, Dragosch told CoinTelegraph, adding:

“Perceived default risk continues increasing, yields continue increasing. This is a rough benchmark of why Bitcoin could be heading toward $200,000.”

Dragosch added that this scenario would hinge on sustained Bitcoin accumulation by corporations and exchange-traded fund (ETF) holders.

Meanwhile, the US spot Bitcoin ETFs are less than $1.3 billion away from surpassing the monthly inflow record of $6.49 billion from November 2024, CoinTelegraph reported on May 23.