This round of inflation seems to be rearing its head again. The Federal Reserve is unlikely to cut interest rates this year and will maintain a hawkish stance; once U.S. Treasury yields continue to rise, the entire financial market may start to tighten.

For the crypto market, this means two major pillars are under simultaneous pressure. Liquidity is tightening, and risk appetite is retreating.

A deadly effect of a high-interest-rate environment is that it keeps draining capital. Investors are eager to flock into safe assets like U.S. Treasuries. The 4.3% yield on the 10-year Treasury is like a warning line—if it truly breaks through, it signals that the fixed income market is beginning to reprice expectations of long-term tightening, and funds that might have flowed into Bitcoin and various altcoins are being forcibly pulled into Treasuries.

What’s more troublesome are the three inflation sources behind this that cannot be solved with temporary measures. Metal prices have risen, which affects industrial costs, and there’s no short-term downward pressure; the explosive growth in electricity demand for AI infrastructure is a long-term structural issue; and then there’s the possibility of Trump intervening in the Federal Reserve—a source of uncertainty more painful than just high interest rates, because markets cannot accurately predict how policies will evolve.

The market’s storyline is starting to reverse. The previous script of "interest rate cut expectations → liquidity easing → risk assets rally" is no longer sustainable. Now, the story of "sticky inflation → stubbornly high interest rates → concerns about economic recession" is taking over. For high-beta assets like Bitcoin, this combination is usually deadly.