The Breakdown - Bitcoin Hits All-Time High — But Nobody Seems to Care

Episode Date: May 23, 2025

Bitcoin just notched a new all-time high, but this time, there’s no mania, no frenzy—just a shrug. NLW breaks down the weirdest ATH in Bitcoin’s history, why it happened without a clear catalyst, and what it says about BTC’s shifting role in the global financial system. Plus, a look at Japan’s spiraling bond market, rising U.S. fiscal fears, and what it all means for safe haven assets. Is Bitcoin finally decoupling—or are we just seeing the early signs of a bigger credit event? Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, May 22nd, and today we are talking about the new Bitcoin all-time high, plus a little bit of macro. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link of the show notes are going to bit.ly slash breakdown pod. Well, friends, the weight is over. Bitcoin is at a new all-time high.

Yesterday saw a morning fake out with Bitcoin touching 109,500 before plunging back down to 106,000. That was technically a new all-time high, but not by much and certainly not by enough for everyone to get excited. Thankfully, Bitcoin spared me the awkwardness of doing an all-time high show

while decidedly below those levels because in the evening, price searched again, reaching a top of precisely 111,88 at around 11 o'clock on the East Coast. 110,000 looked like the solid level throughout the night, and we're currently trading just above 111,000 as I record. There's really not a whole lot to say about the price beyond that. Yesterday, we covered the point that there really isn't an obvious catalyst for Bitcoin to hit a new all-time high. Bloomberg is covering the price action as being about optimism

on U.S. regulations, but really not a whole lot has changed on that front in the past few days. Bitcoin certainly didn't spike in response to the Senate waiving through the Stablecoin bill on Monday night. Price action on Tuesday was green, but only registered a 1.2% gain to recover losses from Monday. The Block is claiming this is just a continuation of the recovery from Liberation Day that has aided all-risk assets, but yesterday wasn't a risk-on day, with both major stock indices closing in the red. In other words, this is a very weird all-time high. Alex Kruger commented, Funding rates in most crypto exchanges are at the baseline or below it.

This is the least euphoric new all-time highs in the history of Bitcoin. In fact, in the past, we've only seen Bitcoin punch up to a new level in outright mania conditions. During the last cycle, we had the breakout as Elon Musk put Bitcoin on Tesla's balance sheet. That led to the double top around the Coinbase IPO and NFT mania taking crypto mainstream. This cycle, we had Bitcoin top the prior cycle high as the first votes rolled in for Trump and reached a top as the first pro-Bitcoin president was inaugurated. For this all-time high, the best narrative we have is a continuation of regulatory and institutional adoption stories that have been building all year.

Then again, with any all-time high show, you have to put the analysis aside just a little bit and bask just a smidge in the vibes. Tyler Winkleboss tweeted, Bitcoin All-Time High on Bitcoin Pizza Day takes the cake. Investor James Levish commented, Bitcoin has now surpassed both Amazon and Google to become the fifth largest asset in the world. Nothing stops this train. Still, Joe McCann of Asymmetric Ventures was closer to capturing the mood, tweeting, Bitcoin new all-time high, I feel nothing.

Moon Overlord hinted at the problem commenting, happy all-time high day to the seven people left on crypto Twitter that still own Bitcoin. American Hoddle, meanwhile, who was popping bottles on the timeline when we broke 100K, hasn't tweeted in a month. In other words, this is easily the quietest all-time high of all-time. Still, the lack of narrative and enthusiasm potentially says a lot about where Bitcoin sits as an asset at the moment. This isn't just the quietest all-time high ever. As Alex Kruger again pointed out, this is the first risk-off all-time high for Bitcoin. Alt-coins did have a positive day alongside, but they struck.

struggled to keep up with a relatively sedate 2.6% gain from Bitcoin. The point is that Bitcoin was not trading like levered tech stocks. In fact, it traded inversely to the NASDAQ on Wednesday. This, of course, led to many people making the claim that Bitcoin had decoupled. Trader Shudog wrote, Bitcoin hitting all-time highs while Treasury rates surge and equities plummet. This is what decoupling looks like. Analyst Noelle Atchison commented, Interesting. We're seeing Bitcoin climb at the same time as U.S. bond yields and the oil price. All else equal, yields and energy prices drain liquidity from markets, so you'd expect Bitcoin to drop. But before anyone cries decoupling, we should zoom out.

Adgeson flagged that Japanese bonds are also seeing a collapse that has materially increased the risk of a bond market event, adding, at times of market stress, both risk assets and safe havens do well. The former because of any likely policy response, which will probably involve injecting liquidity into the market, the latter because liquidity injections usually mean currency dilution, which does not get walked back when the currency passes. So, Bitcoin is still acting like a liquidity-sensitive risk asset despite higher yields and oil prices. But it is also acting like a safe haven. Its dual narrative is an advantage, especially when compared to just risk assets or just gold. I think that this is pretty dead-on and an interesting framework to think about Bitcoin at this moment.

Gold was actually down slightly over the past day, but remains within striking distance of its all-time highs as well. Still beyond gold, it's difficult to find a viable safe haven this week outside of Bitcoin. Let's talk for a minute, though, about what's going on in Japan. The Japanese government bond or JGB market is notorious for its ultra-low interest rates, which were essentially pinned at zero for most of the 2010s. Issues began in the ultra-long end of the market, with 40-year JGB spiking above 3.5% to reach a new all-time high on Tuesday. This rate had been at 0.6% at the end of 2020.

While rates have been steadily rising, Tuesday was a shock move. 20 basis points were added in the blink of an eye. These sort of moves aren't supposed to happen in any part of the bond market during normal conditions, but they're especially unusual for the 40-year. The shock rippled down the yield curve, spiking 30, 20, and 10 JGBs. The 10-year rate is now above 1.5% for the first time since 2009. To make matters worse, the Bank of Japan is trying to sell a lot of long-dated JGBs over the next month. On Tuesday, a sale of 20-year JGB saw its weakest demand since 2012. 30-and-40-year auctions over the next two weeks are expected to be just as bad. Now, no one was expecting these

auctions to go well this month. The country has an inflation problem for the first time in decades, and the BOJ has been struggling to exit decades of yield curve control and currency manipulation policies. Still one market commentator said, the results were even worse than I had expected. The issues have become so stark that Prime Minister Shigeru Ishiba has been forced to comment. On Monday, he said, the government is not in a position to comment on interest rates, but the reality is we're facing a world with them. Our country's fiscal situation is undoubtedly extremely poor, worse than Greece's. That reference to dealing with a world with interest rates demonstrates just how long Japan has been stuck at zero. Also, probably not a great idea, just politically

speaking, to compare your country to Greece if you're trying to address a monetary and physical crisis. Japan, more broadly, is not in a good place. Lawmakers are tossing around the idea of a tax cut to ease cost of living stress, but with rising borrowing costs, it seems like a tough sell. That goes double for the lenders, with Mark Cranfield of Markets Live commenting, the super long sector of the Japanese curve has been suffering from something akin to a domestic buyer strike. Robin Brooks of the Brooking Institute commented that we're in an entirely new world, tweeting, for over a decade, the BOJ bought all of Japan's net new debt issuance. That's over. The rise in Japan's long-term yields is thus about price discovery. Markets are figuring out

what long-term yields should be for a country with debt to GDP around 240%. Presumably, a lot higher. This is no longer about the BOJ trying to slow down to get out of ZERP and yield curve control. It's about trying to stave off a full-blown in the second-largest government bond market in the world. Bitmex co-founder Arthur Hayes commented, B.OJ about to get Mike Tysoned. Every central wanker banker has a plan to raise rates until the bond market punches them in the face. Basically, JGBs are no longer a safe haven asset in any sense of the word. Because of the way price moves inversely to bond yields, which is amplified by duration, investors who are holding 30-year JGBs have made a 50% loss on paper since 2020.

Even just holding the paper since the beginning of the year has meant a 12.5% loss in principle. If you're looking around for a stable place to store wealth right now, you are not finding it in Japan. And yet, in the U.S., the cleanest dirty shirt is getting a whole lot dirtier. U.S. Treasury markets are also spiking, with the 30-year bond reaching 5.1% on Wednesday, just shy of a two-decade high. The 10-year is relatively stable at a still-elevated 4.5%, while the two-year that guides Fed policy is also contained at a steady 4%. Still, the 30-year is the barometer for the long-term viability of U.S. fiscal policy and the bond market isn't happy.

And there are a ton of obvious catalysts. We had Moody's downgrading the U.S. government on Monday for the first time in over a century. All three credit rating agencies now believe that Uncle Sam might not be good for it. In Washington, Trump's big beautiful tax bill is turning into a big beautiful nightmare, as Congress can't agree on anything. According to the latest from House Speaker Mike Johnson, an updated version could go to a vote today. Democrats are united in opposition, and the GOP has numerous holdouts. The bill needs near unanimous support due to the Republican slim margin in the House and is set to face another round of stiff opposition in the Senate. And even if the bill passes, that might not be a great thing for the bond market. This isn't like the dysfunction we saw around government

shutdowns in 2024, which were quickly resolved by a vote. This tax bill calls for large cuts to government spending, but even larger tax cuts increasing the structural deficit. At least in part, bonds are correctly pricing the idea of currency debasement as the deficit continues to climb. George Katram Bone, the head of fixed income at DWS America's commented, Make no mistake, the bond market will have its own vote on the terms of the budget bill. It doesn't seem this president or this Congress is actually going to meaningfully reduce the deficit. Priya Misra, a portfolio manager at J.P. Morgan said, the bond market is giving a warning sign to policymakers that fiscal sustainability issues

cannot be ignored for too much longer. It's not just the bond market, but now those fears are gripping risk sentiment in equities, and credit are also paying attention. Tim Magnuson, the CIO of hedge fund, Garda Capital Partners argued, the market's going to bring discipline to this thing one way or the other. Until you tackle entitlement reform, Social Security, Medicare, Medicaid, they're not going to move the needle. That's the only way. It's always the bond market that brings the discipline. The financial press is starting to discuss the potential of a Liz Trust moment.

You'll recall in 2022, Liz Trust was the prime minister of the UK, for about the same amount of time it takes ahead of lettuce to go bad. Her 50-day stint was punctuated by a budget that featured generous unfunded tax cuts for the wealthy. The 30-year UK guilt went from 3.8% to 4.8 in two weeks, overruling the prime minister's budget and seeing her out of a job. That event created a new phrase in financial markets, the moron risk premium. Investopedia defines it as the extra yield investors' demand on sovereign debt because of policy missteps or unpredictable fiscal policy. On a blog post released on Tuesday, Nobel laureate economist Paul Krugman asked, is this a Liz trust moment for America? Macro-analyst Dario Perkins, who coined the term in 2022, commented,

who knew that if you dilute the basic hedging properties of government bonds via supply shocks, attacks on Fed independence, and thinly veiled threats against foreign investors, you would have to sell your bonds at a discount. Whatever you think of them, this is now the second time that Trump's policies have rattled the bond market in less than two months. The last time, a few weeks after Liberation Day, Trump was convinced to back off on tariffs and cited that the bond markets were, quote, getting a little yippy. Well, they're getting yippy again, but it is unclear if Trump has any room to back down anymore. So with U.S. Treasury's tech stocks and JGBs scratched off the list of viable safe haven assets, the remaining options seem to be

gold in Bitcoin. There aren't really any markets in the world that can absorb the volume of capital stored in global bond markets, but Bitcoin seems to be taking on flows at the margin. Now, at this point, we have a sample size of three days. So I am sharing these things without a lot of confidence. Still, I've long held the position that Bitcoin is to many and will in the long run be a safe haven asset, and yet most of the people who trade it still view it as simply the fastest horse in the race during risk-on periods. that sense has only grown as institutional investors join the space, despite BlackRock's numerous investor notes to the contrary. And the question is how to correctly diagnose what's going on in the bond

market. Both Japan and the U.S. have their own idiosyncratic reasons for bonds to be spiking right now, but U.S. credit default swaps have also been spiking all week and are now at their highest level since 2011. That's not unusual during a bond market shock, but it was also absent from every shock since March 2020. So rather than a bond market revolt, could we be witnessing the start of a major global credit event. If so, and if this is just a policy misstep, then it can be put right by a reversal of policy. But the resolution to every major credit event since the GFC has been firing up the money printers to paper over whatever is broken under the surface. Some are starting to suggest that that's what we're seeing and that's why Bitcoin is decoupled from stocks. Michael Gayette of the lead

lag report writes, if Japan is the source of the credit event, Bitcoin will diverge. The one thing gold in Bitcoin have in common is that they are a counterparty hedge. Stack Hodler commented, Everyone expects yield curve control, but Japan already tried that and look what it got them. A spectacular bond market implosion happening right in front of us. Now every Japanese bank, pension fund, and an insurance company that trusted the BOJ is holding a massive bag of flaming excrement. And so if this is the end result of YCC, why would any rational investor hold sovereign debt from severely indebted nations?

It's possible the music is stopping and we may be about to jump straight to the end. Central bank credibility is shattering in real time. Scarce neutral reserve assets like Bitcoin and gold need to be reprised dramatically high. to reflect a world where investors suddenly realize en masse that sovereign debt is worthless without the backing of the biggest money printing the world has ever seen. Global sovereign debt bubble burst and capital flight into Bitcoin. No longer a prophecy, it's an observation. Now, I don't think it is quite that clear yet, but it's certainly more plausible than it's ever been. For now, that is going to do it for today's breakdown. Appreciate you listening as always, and until next.