A signal more dangerous than a rate hike has appeared: U.S. debt is spiraling out of control.

A recent “dangerous” signal has emerged: the U.S. 30-year Treasury yield has broken through 5%!

Because the “30-year U.S. Treasury yield” essentially represents: the global market’s pricing of the U.S. creditworthiness, inflation, interest rates, and fiscal policy over the next 30 years.

When it breaks above 5%, it indicates that the market is beginning to believe:

• The long-term inflation in the U.S. cannot be contained

• The Federal Reserve will be unable to cut interest rates significantly over the long term

• U.S. fiscal deficits are becoming increasingly dangerous

• U.S. Treasuries need higher yields to sell

• Global capital is re-pricing “risk-free assets”

This will trigger a series of chain reactions.

1. Why is 5% so important?

Because the 30-year U.S. Treasury is the mother of global long-term interest rates, the anchor for global asset pricing, and the “discount rate” for all risk assets!

Many institutions use it as: a benchmark for stock valuation; real estate loan pricing; corporate financing costs; and a reference for global capital return comparisons.

Currently, the Federal Reserve has lowered interest rates from 5.5% to 5% in September 2024, and further down to 3.75% in December 2025, continuing a year of rate cuts. However, the 30-year Treasury yield has not fallen but instead increased, diverging from the rate trend! Because short-term rates are controllable by the Fed, but the 30-year yield is ultimately market-driven.

Therefore, from the current rise in the 30-year Treasury yield, the market is distrustful that the U.S. can control inflation in the future, or that U.S. fiscal health is in danger, and is unwilling to lend to the U.S. government! So, the 30-year yield must rise to attract capital!

This divergence is risky because, although the Fed has cut rates for over a year, short-term rates are falling, but long-term rates are not. This indicates the market no longer trusts the “Fed,” and is saying: “Cutting rates is useless; we still see greater long-term risks.”

2. The most direct impact: valuation assets collapsing

High-valuation assets such as: tech stocks, AI concepts, high P/E growth stocks, cryptocurrencies, venture capital, long-duration assets, will all be affected.

Because the core logic of these assets is: they can make a lot of money in the future. Their high valuation is due to the discounted value of their future cash flows.

But after the 30-year yield rises, their ability to discount future cash flows weakens.

For example: a company earning $10 billion in 10 years, at a 3% rate, is worth $7.4 billion today; at 5%, it might only be worth $6.1 billion! Even a 2 percentage point difference causes a 13% valuation gap, and the longer the time horizon, the more severe the shrinkage.

Thus: the Nasdaq is extremely sensitive to long-term interest rates. That’s why every time “long-term bond yields surge,” tech stocks experience sharp volatility.

3. U.S. fiscal policy may enter a “death spiral”

This is the most dangerous. Because the biggest problem in the U.S. now is no longer the economy, but the “interest” on debt. Currently, U.S. debt has reached $39 trillion, and the 30-year yield has a huge impact on the long-term credit system of U.S. debt. The Fed’s interest rate only influences short-term debt, like 2-month or 2-year Treasuries!

So, if the 30-year yield gets out of control, the impact is far greater than just “rate hikes”! A high 30-year yield is more damaging to U.S. debt. It directly raises long-term borrowing costs, creating a vicious cycle (higher interest → larger deficits → more issuance → even higher yields). While the Fed’s rates are important, they are more of a short-term policy tool and cannot fully offset the upward pressure on long-term yields.

4. The dollar may rise first and then crash

In the short term, the dollar will strengthen because the 5% long-term Treasury is very attractive, prompting capital to flow back into USD, so the dollar has indeed strengthened recently.

But a reversal could happen later if the market realizes: the U.S. relies on continuously borrowing new debt to sustain the system. Then, the dollar’s credibility will gradually erode.

Possible future developments:

• Gold prices rise

• Discussions of de-dollarization heat up

• Sovereign assets are re-priced

Therefore, I believe gold may have another wave of rally, with this acceleration driven by the Fed’s rate cuts after 2024 (from 2700 to 5500)!

5. What does this mean for the crypto market?

In the short term, probably not good, because high interest rates will drain liquidity, and funds will prefer to earn 5% from Treasuries while doing nothing. But once dollar credibility declines, market logic will change, and capital will shift to commodities like gold and silver, repeating this cycle.

Meanwhile, stocks—especially the tech stocks driven by this cycle—will face pressure as long-term rates remain high. Since current crypto assets are following tech stocks, they will also be affected.

Even if the Fed announces further rate cuts, it can only influence short-term rates. So, we are indeed at a “high-risk” moment!

Historically, similar cycles include the 1980s, when the Fed kept cutting rates but long-term Treasury yields remained high, leading to a series of economic recessions.

Another example is the rate-cutting cycle of 2022, when the 30-year Treasury yield stayed elevated. Everyone remembers what happened in 2022.

Final summary:

The real danger now is not: “Will the Fed cut rates?”

But rather:

• Whether long-term interest rates have already begun to break away from control.

Because short-term rates are still within the Fed’s influence.

But the 30-year yield is ultimately determined by the global market.

If in the future, we see: the Fed keeps cutting rates, but long-term yields stay high!

That would mean: the world might be entering a new era:

High debt + high interest rates + low growth!

And this environment will be tough for:

• U.S. stocks

• Real estate

• Tech bubbles

• Crypto markets

So, although the market is rallying strongly now, the more it rises in such times, the more cautious we should be.