There is a popular saying that says, “If you want to understand America, see a pro wrestling fight.” While it may be glib and a little over simplified, it seems to ‘call’ true as the US financial markets now exhibit features similar to Pro-Wrestling’s concept of “Kayfabe.”

Kayfabe means an illusion that the ringing written act is real, where the audience buys the same while suspending their belief in entertainment.

A similar dynamic has played out in the financial market for at least a decade in which the US government has repeatedly hit its self -impaired debt ceiling or loan limit, a sign of fiscal crisis. Still, investors continued to lend money to the government by ultra-low yields, including in times of stress in the global economy, thereby maintaining Kayfabe that the government is a safe and reliable borrower.

Recently, however, participants in the bond market postponed Kayfabe when the legendary trader Paul Tudor Jones had warned, weakened the illusion and strengthened the case to invest in assets with the garden and shop-of-value Appel like Bitcoin (BTC) and gold.

Bonds are bursting Kayfabe

This week’s big news is the American 30 -year -old Treasury outcome that turns on the 5% mark and how it could destabilize the financial markets. However, we have been there before last October, according to Data Source TradingView.

READ MORE: US 30-year-old Treasury gives violations 5% in the middle of Moody’s rating downgrade, tax concerns

The real story is the tip of the yields of the Treasury Inflation -protected securities (tips). Their main amount is adjusted for inflation.

The 30-year-old tips, which recently rose over 2.7%, the highest since 2001. In other words, investors demand a dividend at least 2.7% greater than inflation in return for borrowing money from the government for three decades.

This comes as the growth of the consumer price index (CPI) continued to slow down against FED’s target of 2%, and the market-based forward inflation measures such as breakevens remain stable in well-known intervals seen since 2022. Plus, the allegedly inflationary US-China Tariff War is relieved.

Divergence is a clear indicator that investors are seeking the most expensive real benefit due to concern about fiscal policy and not inflation, duty or growth dynamics.

“The world says we don’t trust your long-term fiscal orbit, and we want to be compensated for it,” said pseudonym analyst Endgame-Macro in one explains on X.

From May 19, the US national debt, also known as the total public debt, was $ 36.22 trillion. It is expected to rise by 22 trillion dollars over the next 10 years with Debt to BDP reaches 156% in 2055according to Analysis performed by EYS Quantitative Economics and Statistics (Quest) practice. The Quest report also said that the burgeoning debt weighs heavily on economic growth.

Robin Brooks, Senior Fellow in Global Economy and Development Program at Brookings Institution, pointed to the five -year real interest rate that bond players are asking fiscal sustainability.

“5y5y tip Real interest rate is now at 2.5%, which is the highest level dating back to 2010. The most important thing is that it far exceeds levels seen under Hawkish fed episodes, such as 2013” Taper Tantrum “or 2022/23 Hiking Cycle after Covid Inflation -fright,” 5 years that spared, which became the tip.

“It makes it all more likely that many years of irresponsible fiscal policy catch up with the United States, adding speed to the need to get our fiscal house in order,” Brooks added.

FX binding correlations are dead

Another sign that the market wakes up to the fact that the emperor has no clothing is the degradation in the traditional connection between the exchange rate (Forex) and the bond markets.

Typically, increasing bonds increase the appeal to the home currency, causing it to appreciate against other FIAT currencies. E.g. Has EUR/USD historically closely tracked the spread between the yields in German and US two-year government bonds.

But no longer. EUR/USD has risen sharply since the beginning of April despite the narrowing of the two -year dividend difference, led by a sharp increase in the US two -year dividend. The division into contexts indicates that concern over fiscal stability has probably caused investors to move away from US assets.

The degree of Dollar Bearishness is shown in the option market, which is now mostly bullish on EUR/USD since Covid. It is unusual for the market for the options to put a larger prize upside down in euro than the disadvantage, according to Brooks.

Bullish Bitcoin and Gold

Historically, governments facing tax concerns have resorted to inflation and refund of debt by printing more money. They are likely to resume the same path and incentive the demand for hard assets like gold and bitcoin.

“All roads lead to inflation. It is historically the way any civilization has come out is that they bloated their debt,” said Tudor Jones last year, naming BTC, gold and raw materials as preferred possessions over longer duration.

Two years ago, economist Russell Napier expressed a similar statement and said, “We have to prepare for an era with increasing financial oppression and sustained high inflation.”

Economic oppression refers to government policies that direct funds from the private sector to the public sector to help reduce national debt. The scenario is characterized by inflation that exceeds the return on savings, capital controls and interest rate capsules, all of which could bode well for bitcoin and gold.

Interest rates are usually implemented through policies such as interest rate curve control, which has the central bank targeted at a specific level of the long bond yields, let’s say 5%. Each time, the yield seems to rise above the said level, the central bank draws up bond purchases and injects liquidity into the system.

Arthur Hayes, CIO and founder of Maelstrom, have said that yielding basket control will eventually be implemented in the United States, tormenting a record rally in Bitcoin.

Hayes recently said President Donald Trump’s decision to dilute trade dollars after early April in panic in the financial markets is proof that the financial system is too geared for tough reforms and guarantees further money creation.

“They can call it what they want – just don’t call it QE – but it has the same effect: Liquidity rises and Bitcoin benefits,” Hayes said.

Impending rally won’t be smooth

The Bullish case for BTC does not necessarily mean that there will be no hiccups.

The US Ministry of Finance serves as a basic ground for global funding and increased volatility in these bonds can cause financial tightening, which potentially triggers a global touch for cash that sees investors sell each asset, including Bitcoin.

From now on, the Move Index, representing the 30-day implicit or expected volatility in the US Treasury, remains in a downward trend.