The Inflation Setup: Bond Yields, Banking Risks, and Bitcoin’s Potential Path

Longer duration bond yields have been steadily climbing since the Fed cut rates in September.
‍
Fiscal deficits are spiraling out of control, with over $500Bn added to the federal debt in recent weeks alone.

As Paul Tudor Jones said it: all roads lead to inflation.

If inflation is on the horizon, being long on bonds isn't favorable - hence, the surge in yields. Bitcoin stands as the clear escape route for what's likely coming.
‍
The probability of faster-than-expected inflation in '25 is rising, which could prompt the Fed to ease off liquidity injections.
‍
This scenario isn’t ideal, as debt rollover needs remain high, and combined with rising inflation, we may be looking at a setup for potential banking system failure.

TLDR: There may be a small window of opportunity to make the most of this cycle before the real challenges hit.

Data-wise, our Liquidity Index decreased by -0.39t (-0.32%) last week, key driver of this is the MOVE Index.

PBoC has seen decent liquidity injections while most Central Banks remain cautious.

The RoC remains positive. Keep an eye on MOVE index and DXY; any weakness here could signal the start of a strong #Bitcoin move.