The crypto market could be approaching a major turning point as new macroeconomic signals related to rising inflation and economic uncertainty emerge in Japan and the United States.
The market has already absorbed billions in capital outflows due to the US-China tariff war and geopolitical tensions between the US, Iran and Israel. These new macro developments threaten to put further pressure on risk assets.
Yields on Japanese and US government bonds reached their highest level in decades
Economic uncertainty is rising simultaneously in Japan and the US, with both countries’ 10-year bond yields hitting new highs.
Bond yields represent the return investors earn by holding government bonds. They generally reflect expectations around economic activity, inflation and liquidity conditions.
At the time of writing, Japan’s 10-year bond yield had reached 2.83%, a level not seen in more than two decades. Meanwhile, the US 10-year yield rose to 4.68%, the highest level since August 2007.
Historical data charting the relationship between Japanese bond yields and the crypto market showed a consistent pattern. Rising bond yields preceded Bitcoin’s decline [BTC] while falling bond yields were accompanied by a recovery.
That correlation took place in January 2026 and again in March 2026.
The correlation between the two has now deepened to -0.14, the steepest negative value yet. This suggested that a continued rise in bond yields could put further pressure on the market.
Zoomex Managing Director Fernando Lillo provided context on how this cycle differs from previous ones.
“In previous market cycles, rising Treasury yields typically led to an aggressive unwinding of digital assets as crypto acted as a proxy for high-beta liquidity. But even as Treasury yields rose and Bitcoin retreated from $82,000 to $77,000, implied and expected volatility has not unusually risen,” Lillo said.
Why are investors getting defensive?
The risk posed by this difference is directly related to the tighter financial conditions.
Rising bond yields indicated the economy was under pressure and inflation could accelerate. That shift pushed investors away from risky assets and toward government bonds.
Inflation data from both countries supported these concerns.
Inflation in Japan rose from 1.3% to 1.5% between March and April 2026. US inflation rose from 3.2% to 3.4% over the same period.
Both showed an increase of 20 basis points.
Moreover, the broader geopolitical backdrop has also shaped market conditions.
The ceasefire between the US and Iran caused a capital inflow of $333.05 billion into the crypto market between April 8 and May 10. About $165 billion has been received recently.
Expectations about interest rate increases increase the risk
AMBCrypto had reported that Bitcoin faces increased risk due to its growing exposure to institutional investors.
That report warned that Bitcoin risks a steeper decline given the lack of any clear signal of macro easing, with market expectations increasingly tilting toward a rate hike.
It added that markets had priced in a 73.6% probability of a rate hike, indicating that further tightening remains the most likely scenario and that the conditions negatively impacting risky assets are far from resolved.
Final summary
- The Japanese 10-year yield reached 2.83%, while the US 10-year yield rose to 4.68%.
- The crypto market’s correlation with bond yields weakened further to -0.14, indicating increasing downward pressure.