The US Debt AI Inflation Trilogy: BTC Bets on Liquidity Easing

According to Woofun AI, Washington is facing macroeconomic choices to maintain the stability of the treasury bond market, maintain the AI investment cycle, and suppress high levels of inflation. Its core logic favors sacrificing inflation in exchange for the release of liquidity and long-term risk transfer. This structural change provides a continuous smooth wind environment for gold and BTC.

The sharp rise in long-term US bond yields was not due to a single factor, but was the result of multiple pressures. As of August 24, the 10-year US Treasury yield was about 4.70%. The 30-year yield previously hit 5.23%, approaching a 20-year high.

This upward trend stems from the persistence of inflationary risks, continued expansion of fiscal supply, shrinking marginal purchases for long-term assets, and intense competition for capital for AI infrastructure. Investors require higher risk compensation before they are willing to hold long-term bonds, resulting in high yields. Faced with this situation, the US Treasury announced that it would at least double the maximum scale of liquidity-supported repurchase operations in an attempt to reduce long-term interest rates.

Although there was a brief decline in yield after the news was released, it failed to stabilize. This shows that only a few billion dollar repurchase operations cannot solve the underlying problems of oversupply and inflation.

Geopolitical conflicts and AI capital spending have combined to exacerbate the deep impact on the bond market. The war in Iran is driving up oil prices and increasing cost pressure, while exposing gaps in arms supply, forcing the government to increase spending to deal with a new type of war, thereby suppressing real growth and taxation.

At the same time, AI is another major catalyst, boosting economic growth and short-term inflation through large-scale investment. Although it helps to dilute debt ratios through growth, its huge capital demand is spilling over into the bond market. Balance-sheet-healthy hyperscale cloud vendors are beginning to compete with the Ministry of Finance for traditional government-led time periods. The Bank for International Settlements estimates that the total amount of bonds issued by hyperscale vendors in 2025 will exceed 100 billion US dollars, mainly for a long period of time. According to the Dallas Federal Reserve's analysis, the AI-related investment-grade issuance scale is about 300 billion US dollars, which is equivalent to a 10-year equivalent period of up to 360 billion US dollars after long-term conversion.

According to data compiled by Woofun AI, this huge mismatch of terms has left the US in the trilemma of strictly controlling inflation, maintaining stable treasury bonds, and supporting AI growth, and the most vulnerable political sacrifices are often inflation control goals.

Current US Treasury Secretary Bezent's coping strategy focuses on protecting the treasury bond market. The measures include protecting the yen to reduce the risk that Japan will be forced to sell off as the largest overseas holder of US debt, because Japan needs dollars when interfering in the foreign exchange market, and selling US debt is one way to obtain US dollars.

Furthermore, by repurchasing long-term assets with poor liquidity and using newly issued short-term treasury note financing, Bezent changed the maturity structure of government debt, reduced long-term long-term periods, and increased short-term notes. This approach of moving issuance to the short end is similar to the 2023-24 Yellen era strategy of relying heavily on short-term securities when demand for financing soared. In their 2024 paper, Stephen Miran and Nouriel Roubini called this an “aggressive Treasury issuance,” pointing out that the issuance of short vouchers that exceeded the conventional path took about 800 billion US dollars out of the market for a long period of time. The effect was similar to “invisible QE”. The easing of financial conditions was roughly equivalent to cutting interest rates by 1 percentage point, and accuse that the move was aimed at boosting the 2024 election.

As the Trump administration may adopt a similar operation, the 'currency depreciation trading' is expected to resume. Gold has been the first to test this logic. From August 1, 2024 to August 24, 2026, the price of gold rose by 90% from $2,455 to $4,664 per ounce, driven by declining trust in the dollar, concerns about inflation, and the political need to expand the money supply to get out of the debt cycle.

The performance differentiation between BTC and gold reveals the market's repricing of 'digital gold' attributes. In the last round of gold-led market growth, gold rose 39.6% from October 1, 2025 to January 29, 2026, while BTC fell 30.4%, underperforming.

However, there was a recent reversal in price behavior. From August 18 to 24, BTC rose 22.2% and gold rose only 5.9%. This acceleration occurred after the Treasury Department increased long-term repurchases, although Washington's push for crypto legislation during the same period also played a role. If the market sees this as an invisible QE rather than a pure depreciation transaction, the trend of BTC outperforming gold is likely to continue as crypto assets respond strongly to global liquidity expansion. If inflation continues to be above target, the deficit remains close to 6% of GDP, and AI borrowers continue to increase long-term supply, the cost of maintaining a stable and growing cycle of treasury bonds will be reflected in shorter debt maturities, normalized liquidity coverage, and tolerance for higher inflation, which is beneficial to gold and BTC. Conversely, this logic will be weakened if inflation falls back to 2%, Congress establishes a credible fiscal path, AI infrastructure self-financing, or private demand can absorb interest-paying debt without a premium. The focus of the market should shift from the Fed's interest rate cut to Washington's trade-off in the midst of the trilemma. If the Treasury speeds up the long-term transition, BTC will usher in a longer-term tailwind.