Author: Matt Cole, CEO of Strive
Compilation: Jiahuan, ChainCatcher
This is another lengthy macro article, but I don't often write such content. A macro transformation, arguably the most significant in decades, is unfolding before our eyes.
One key point in my discussion of the US dollar's long-term trend last week was where the long end of the US Treasury curve is headed.
Stanley Druckenmiller published an excellent article last night in *The Wall Street Journal*, titled "Let the Bond Market Talk." The US's current fiscal trajectory is unsustainable: with the economy near full employment and inflation still above target, the fiscal deficit remains around 6% of GDP, which is extremely irresponsible; the relentless expansion of entitlement spending like Social Security and Medicare simply passes the fiscal burden to the next generation; and attempting to suppress long-term Treasury yields won't address the root cause of the fiscal problem.
The Real Constraint of the Fiscal Problem Lies in Politics, Not Economics
Druckenmiller's point is that suppressing yields only postpones the fiscal discipline that high rates would otherwise force upon Washington. From an economic logic standpoint, he is correct, but I believe our assessments of the ultimate outcome may not differ greatly.
Back in the mid-2010s, I had already concluded that expecting the bond market to consistently exert pressure and force the US into establishing fiscal discipline sufficient to solve the problem was unrealistic. This was one of the key reasons I first turned to Bitcoin. Druckenmiller himself has invested in Bitcoin and other hard assets, leading me to believe his diagnosis of the underlying issue is likely similar to mine.
Rather than predicting what Washington will ultimately do, his article seems more like a warning to Washington about what it *should* do before it's too late.
To me, this reads more like a near-desperate plea from a top macro investor: let the market discipline a political system that can no longer discipline itself. I hope policymakers will listen, but regrettably, I know they won't.
Druckenmiller himself explicitly points out the political constraints: no political party will campaign on reforming entitlement spending. This is precisely the problem.
Fiscal solutions that work on paper often don't win elections. While Treasury Department and other government agency heads are appointed officials, their room for action is ultimately determined by elected politicians and the voters behind them.
This distinction is crucial. Appointed officials can be intelligent, responsible, and genuinely desire a stronger nation, yet they remain bound by real-world political incentives.
Scott Bessent clearly understands the fiscal challenges the US faces. I believe his basic diagnosis aligns with Druckenmiller's. But when Bessent ran the Treasury, he had to operate within the existing political system—a system whose policy direction is set by elected officials and cannot simply follow the optimal solution from a macroeconomic ledger.
The experience of the Department of Government Efficiency (DOGE) illustrates this point. Elon Musk may be the most effective corporate operator of our generation, and his explicit mandate upon entering government was to slash spending significantly.
But institutional and political forces proved more powerful. DOGE failed to alter the US fiscal trajectory; the deficit continued to widen.
This is not a critique of anyone's competence or motives but highlights the structural nature of the constraints. Investment must be based on reality, not the world we wish to see.
As the fiscal situation continues to deteriorate, and policymakers refuse to let long-term rates fully reflect this change, the adjustment pressure doesn't vanish; it merely shifts elsewhere. The US dollar will become the system's pressure release valve.
5.25%—5.85%: The Policy Threshold for the US Treasury Market
The US Treasury market today can hardly be called a truly free market, untouched by intervention.
The Federal Reserve currently holds approximately $1.6 trillion in Treasuries with remaining maturities beyond 10 years, accounting for about 28% of the total supply in that duration.
After long-term yields approached nearly two-decade highs, the US Treasury doubled its planned buyback volume for 10- to 30-year Treasuries, explicitly stating that operations could be significantly scaled up in the future.
The significance of these actions lies not only in the scale of funds but also in what they reveal about the government's response logic when facing rising long-end yields.
The Treasury has clearly shown sensitivity to rising long-term yields, but the funds committed are insufficient to genuinely reverse the yield trend. The market also didn't view the initially announced buyback plan as a turning point.
Druckenmiller is correct: once the market perceives that the Treasury is propping up Treasury prices and suppressing long-term yields, every further increase in yields becomes a new test of the policy line in the sand.
I believe the Treasury will ultimately regret intervening so early and with such limited scale. It exposed its sensitivity to long-end yields but didn't commit enough to change the market trend, essentially inviting the market to find the true policy red line.
My expectation is that current interventions won't work, long-term yields will continue to rise, and the bond market will ultimately force Washington to prove whether it is truly prepared to act.
When the market truly hits the policy bottom line, I believe Washington will eventually get serious. Policy signals like expanding Treasury buybacks or utilizing the Treasury General Account (TGA) are important, but if long-end Treasuries continue to be sold off, signals alone won't be enough to shift the market.
At some point, the market will force the Treasury to stop telling investors "what it can do" and instead commit funds large enough to alter the market trend.
Over the past few years, I've been watching a key resistance range on the 10-year Treasury yield chart: 5.25%—5.85%.
In my view, this is the most significant test area in the current secular uptrend in long-term rates. This range wasn't drawn based on last week's price action.
It stems from my fundamental assessment of the US debt trajectory: as fiscal problems worsen, long-term yields will naturally rise; and at some level, the political and financial consequences of tolerating further yield increases will become unbearable, forcing action from the Treasury or the Fed.
The chart matters, but this was never about drawing lines on a chart and assuming yields would automatically reverse at some point.
This range is important because I've always believed deteriorating fiscal fundamentals would eventually drive yields here; simultaneously, the cost of allowing yields to break significantly above this range would become increasingly difficult to bear.
If the 10-year yield enters the 5.25%—5.85% range, the headlines practically write themselves: 10-year Treasury yields rise to levels not seen since around 2007, but this time the US carries far more debt and is in a much more difficult fiscal position.
Price moves first, narrative follows. When the bond selloff is severe enough, the market will quickly start discussing "bond market dysfunction," "destabilizing government financing," or even "the world's most important bond market falling into crisis."
This narrative itself increases the political pressure on the government to act. Mortgage rates, government interest payments, stock valuations, and overall financial conditions would come under greater strain; every further rise in yields would exacerbate the government's interest burden and fiscal pressure.
In fact, the Treasury has already begun responding even before the market enters my watch zone.
If yields ultimately enter this range, I expect the Treasury or the Fed will be the first to blink and intervene in the market on a massive scale.
Possible tools include: significantly expanding Treasury buybacks, greater reliance on short-term T-bill financing, using the Treasury General Account, re-expanding the Fed's balance sheet, implementing explicit or implicit yield curve control, or a combination of the above.
I wouldn't be surprised if the eventual intervention in the Treasury market is on a completely different order of magnitude than the currently announced plans.
However, significant financial market stress may occur before policies intervene on a massive scale. Rising long-term yields would further pressure stock valuations, while AI is causing more investors to question whether corporate moats can be sustained long-term. Both occurring simultaneously would put greater pressure on traditional stocks and other risk assets.
The Dollar as the Pressure Valve, Bitcoin's Opportunity Taking Shape
Bitcoin is even more noteworthy because the policy endgame is becoming increasingly clear.
In the final surge of yields, will Bitcoin follow the market lower noticeably, or hold up and continue rising? In my view, both scenarios are roughly equally probable.
If Bitcoin experiences a significant decline at that time, I would view it as a potentially once-in-a-lifetime opportunity to add, because policymakers would ultimately be forced to intervene on a larger scale.
But I wouldn't restructure my entire portfolio waiting for this opportunity. The current macro environment is sufficiently favorable. In my view, if you haven't already built a position, now is the time to start.
A pullback would be a rare opportunity; but the market might also price in the eventual policy pivot ahead of time, shrugging off short-term pressure.
From a traditional fixed-income investment perspective, the 5.25%—5.85% range has always been an area suitable for substantially increasing duration exposure.
If the Treasury or the Fed acts as I expect, long-term Treasuries could perform exceptionally well, as policymakers would push yields back down.
But Strive does not execute a fixed-income strategy; we have a Bitcoin strategy. In such a macro environment, our goal is to maximize Bitcoin exposure as much as possible while maintaining prudence.
US Treasuries would certainly benefit from policy intervention, but I prefer being long risk, long scarcity, especially the strongest-performing asset within that category. For me, that asset is Bitcoin.
Rather than holding an asset whose yield is being explicitly suppressed by policymakers, Strive prefers to amplify Bitcoin exposure in such a macro environment.
This brings us back to my US dollar thesis from last week.
Druckenmiller is right: governments propping up prices against fundamentals will ultimately fail. But that doesn't mean governments cannot suppress the specific price they target for a very long time.
If Washington refuses to genuinely cut spending, then among politically viable options, suppressing long-term yields and allowing the dollar to weaken might be the lesser evil.
The correct solution is, of course, more conservative, sustainable fiscal policy. But since that path is politically difficult, with the US's current debt level, allowing long-term yields to spiral out of control could quickly trigger a more direct Treasury market crisis.
Financial repression via policy-suppressed long-term rates and a weaker dollar are not ideal outcomes, but they remain more acceptable than letting the US government's financing system rapidly fall into disorder under market shocks.
This is why the dollar becomes the pressure valve. The Treasury and the Fed can suppress long-term yields, but they cannot make the fiscal imbalance disappear. The adjustment cost must shift elsewhere, and a weaker currency is the politically more palatable choice.
Therefore, I don't view a US Dollar Index dropping to the high 60s or low 70s as an unimaginably extreme outcome. The dollar would be at modern-era lows, but not unprecedented on a longer historical scale.
Bitcoin has repeatedly benefited in past weak-dollar environments, but it has never experienced a period where the US Dollar Index trended down to these levels. Bitcoin was born after the 2008 dollar low; its entire history has been in an environment where the dollar was recovering from or significantly higher than those levels.
Thus, a trend-driven new low for the dollar would present a truly unprecedented macro environment for Bitcoin. The developments in the Treasury market add another layer of fundamental support to the framework I previously proposed.
The dilution of the dollar's purchasing power enlarges the pool of capital seeking scarce assets; as Bitcoin gains recognition as a monetary asset, it can attract an increasing share from this pool.
Meanwhile, AI is making technology and product supply more abundant, making it harder for traditional corporate moats to be sustained long-term. In contrast, Bitcoin's scarcity cannot be replicated or diluted by competitors, enhancing its appeal.
The most explosive scenario is when these forces begin to work simultaneously: growing global capital seeking scarce assets; Bitcoin attracting an increasing share of that capital as it continues to outperform other scarce monetary assets; and Strive further amplifying the upside elasticity from Bitcoin's rise through its own capital structure.
These drivers are not independent; they compound each other.
This is what I see as the "home run scenario": a weakening dollar, policymakers increasingly actively suppressing the long end of the Treasury curve, AI continuously undermining the scarcity of traditional corporate moats, Bitcoin re-establishing itself as the strongest-performing scarce monetary asset, and Strive positioning itself to amplify Bitcoin's performance in this environment as much as possible.
If the bond market triggers a brief Bitcoin decline during this process, I want to buy aggressively; if Bitcoin prices in the policy endgame ahead of time and doesn't show a significant pullback, I want to already have my position established.
Druckenmiller concludes his article by calling on Washington to "let the bond market talk." I share his warning and, like him, am dissatisfied with Washington's persistent reluctance to address the root problem, ultimately leaving the cost for the next generation.
But the bond market must deliver a much stronger warning to force policymakers into intervention on a scale large enough. When that moment arrives, they are more likely to choose to silence that voice rather than undertake the fiscal restructuring necessary to solve the problem at its root.
The path I've been observing for years is becoming increasingly clear: the 10-year Treasury yield enters the 5.25%—5.85% resistance zone, the Treasury market narrative shifts to crisis, Washington is forced to commit truly large-scale funds, the pressure that should be reflected in long-term yields is transferred to the dollar, and the dollar's long-term downtrend accelerates.
In summary: the market's expectations for Bitcoin's long-term upside potential may still be overly conservative.
