Bitcoin could surge past $200,000 if the Federal Reserve delivers deep rate cuts, according to analysts at Kobeissi Letter.
In their latest commentary, the global capital markets expert argues that if President Donald Trump’s call for a 300 basis point reduction were realized, conditions could align for a massive rally in crypto. But for such a scenario to unfold, the path runs through an increasingly fragile U.S. debt market.
Bond Market Rejects Rate Cuts
The Fed is widely expected to cut rates for the first time in 2025 on September 17, with markets assigning a 90% probability to a 25 basis point move. Some traders even anticipate 50–75 basis points of easing this year.
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Instead of relief, long-term Treasury yields are climbing: 30-year yields are back at 5%, a level last seen in the 2008 financial crisis. This paradox, or rising long-term yields in the face of imminent cuts, highlights investor skepticism, according to Kobeissi Letter, a popular global capital market commenter.
The U.S. has issued over $200 billion in bonds in just five weeks, testing demand for government debt. But investors are demanding higher “term premiums” to hold Treasuries, with risk pricing now near decade highs.
At the same time, core inflation has pushed back above 3%, raising doubts about the Fed’s ability to ease without stoking further price pressures. If inflation persists, the dollar could lose another 25% of purchasing power in the next decade, compounding the 25% erosion since 2020.
Meanwhile, the U.S. unemployment rate for 16–24-year-olds has risen to 10%, signaling a weakening labor market amid rising inflation. Gold prices are steadily climbing as investors hedge against the mounting global deficit spending crisis.
Taken together, these trends point to a situation where prices continue rising even as economic growth stalls and job opportunities shrink. Economists call this stagflation—a dangerous phenomenon that leaves households facing higher living costs while traditional policy tools struggle to stabilize the economy.
“Stagflation is here,” Kobeissi concludes, underscoring the growing risks to both fiat markets and the broader economy.
Lessons From the UK and Japan
Examples of this dynamic can already be seen abroad. Kobeisi points to The Bank of England, which has already cut rates five times in the past 12 months, citing a weakening economy and labor market. Despite those cuts, the UK’s 30-year yield just broke above 5.70%, its highest level since 1998.
Similarly, Japan’s 30-year government bond yield has climbed past 3.20%. In both cases, markets have “rejected” central bank easing, punishing deficits and inflation with higher borrowing costs.
Why This Matters
For crypto investors, these dynamics underscore a critical narrative: fiat debt markets are flashing warning signals. As the Fed loses grip over rates, Bitcoin and other decentralized assets may once again present themselves as hedges against both inflation and sovereign risk.
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People Also Ask:
Stagflation is when inflation rises while the economy slows and unemployment increases. It’s dangerous because people face higher living costs while job opportunities shrink, making traditional policy tools less effective.
If the Federal Reserve cuts rates aggressively, investors could lose confidence in U.S. bonds and fiat currencies. This shift may drive more capital into alternative assets, such as Bitcoin, potentially pushing its price higher.
Normally, rate cuts lower borrowing costs. But when investors fear too much debt or inflation, they demand higher returns to hold government bonds. This drives long-term yields up even as central banks try to push rates down, a sign of lost confidence.
