Treasury Market Under Pressure: Will BTC Bet on Inflation or Deflation?

The US Treasury market is under pressure due to a combination of factors including stubborn inflation risks, heavy fiscal supply, thinner marginal demand for long duration, and the emergence of AI infrastructure as a competitor for capital.

As a result, investors are demanding higher compensation to hold long-term bonds. The 10-year Treasury yield has recently touched around 4.70%, while the 30-year had reached near a two-decade high of 5.23% on August 24.

To address this issue, the Treasury announced plans to double the cap on liquidity-support buyback operations. However, yields briefly pulled back but failed to hold, indicating that the underlying supply and inflation problems cannot be resolved with just a few billion dollars of buybacks.

According to experts, Washington will likely choose to preserve stability in the Treasury market and the AI investment cycle, at the cost of keeping inflation elevated for longer. This is seen as a durable tailwind for both gold and Bitcoin (BTC), injecting liquidity while taking duration risk off private-sector balance sheets.