In late September, two seemingly independent pieces of news converged on the same interest rate coordinate: on one side, Bank of America raised its year-end yield forecasts for 10-year and 2-year U.S. Treasuries to 5% on September 25, just two days after the 10-year Treasury yield had touched 5.14%, returning to its highest level since 2007; on the other side, Japan's Minister for Growth Strategy, Hiroshi Kadowaki, publicly declared that the "Abenomics-style" era of re-inflation, centered on aggressive monetary easing and flexible fiscal policy, was over, and Japan no longer needed to rely on massive monetary easing. Simultaneously, Goldman Sachs strategists raised their target price for the U.S. dollar against the Japanese yen over the next 12 months to 150, effectively endorsing the continuation of "strong dollar + weak yen" based on the interest rate differential between Japan and the U.S. In Bank of America's pricing framework, high interest rates will lower the present value of forward cash flows, combined with the implied high inflation pressure from raising the average price of Brent crude oil in the second half of the year to $95 per barrel, leading to a near-unified logic in global macro research: rising risk-free rates and high energy prices will compress the valuations of various high-volatility assets, including BTC and ETH, and push funds toward dollar assets that yield higher returns and appear safer. Under this new consensus of "high rates + retreat from easing," the era of cheap funds has come to an end, and the real question that needs to be answered is: with 5% Treasuries as the interest rate anchor, how will the risk appetite curve for crypto assets bend after Japan pivots from ultra-easing and re-prices its yen carry structure, and how will the flows and trading structures across markets be forced to rearrange?
Bank of America Bets on 5% Treasuries: Global Pricing Anchor Rises
When the 10-year Treasury hit 5.14% on September 23, marking a high not seen since 2007, Bank of America straightforwardly raised its forecasts for year-end yields on the 10-year and 2-year Treasuries to 5% on September 25, essentially telling the market: 5% is not a "peak" but a new sustainable risk-free rate anchor. For all assets priced using discounted cash flow models, this anchor's rise means a comprehensive increase in discount rates—the further out future cash flows are, the thinner their present value will become. At the same time, Bank of America raised its forecast for the average price of Brent crude oil in the second half of the year to $95 per barrel, pointing to a combination expectation of "persistent inflation + high rates for longer": high energy costs will compress margins, while high rates will lower the value of future cash flows, and for risk assets from U.S. growth stocks to high-beta on-chain varieties, valuation centers will need to be compressed under the same discount framework.
In this high-yield dollar environment, some funds that were previously willing to accept high volatility for returns will find their holdings reassessed: on one side is the highly volatile and liquidity-sensitive BTC and ETH, and on the other is U.S. Treasuries and various money market instruments with yields raised to 5%. The summary of Bank of America's viewpoint is direct: a high-rate environment compresses the present value of future cash flows and simultaneously raises the appeal of dollar assets relative to high-volatility assets, including cryptocurrencies. When the risk-free rate itself provides a decent nominal return, the yield threshold for holding "long-duration narrative assets" like BTC and ETH is passively raised, leading some hedge funds, crypto funds, and institutional capital to prefer to flow new funds or even existing positions back gradually into more certain-yielding Treasuries and money market products. For the crypto market, this round of resetting the "5% pricing anchor" is first reflected in the overall lowering of risk appetite for marginal funds.
Japan Declares Easing Over: Yen Bulls Awaken
When Japan's Minister for Growth Strategy, Hiroshi Kadowaki, openly stated that "Japan no longer needs to rely on large-scale monetary easing and flexible fiscal expenditure for re-inflation policy," and declared the end of the "Abenomics-style" re-inflation era centered on such easing, the market felt not just a technical statement but the closing bell of a decade-long narrative. For a long time, Japan maintained an ultra-loose monetary policy among major developed economies, with the yen widely used as the funding currency for global carry trades, being the last large faucet in the "cheap money" system. Kadowaki was previously seen as one of the more active promoters of re-inflation policies within the Japanese cabinet, and now he announces the end of this era, effectively telling yen short sellers, global carry trade bulls, and high-leverage risk asset bulls: this virtually unlimited liquidity well will no longer be a consensus allocation without political resistance. For the crypto market, this signifies a deep variable changing—both the U.S. risk-free rate is rising, and the imagination of Japan's "zero-cost funds" is retreating, with the global leverage costs and risk compensations behind high-volatility assets like BTC and ETH being repriced.
In contrast to this turning signal, Goldman Sachs strategists also raised their forecasts for the U.S. dollar against the yen to 150 for the next 12 months, betting on the maintenance of the Japan-U.S. interest rate differential and the ongoing benefits from Japan's ultra-loose monetary policy winding down. On the macro narrative level, one side is political signals from policy insiders releasing the "end of the easing era," while the other side is leading Wall Street institutions continuing to bet numerically on yen depreciation and the continuation of carry trades; this misalignment in itself will amplify the uncertainties in the paths of interest rates and exchange rates: if the market trades along Goldman Sachs' path, the role of the yen as a funding currency will be extended, and some hedge funds and crypto funds will still use low-cost funding related to the yen to leverage positions in BTC and ETH; but if Kadowaki's shift gradually transforms into a broader policy consensus, yen bulls will return to the market, and any "squeeze" on yen shorts and carry trades will quickly transmit to high-volatility assets, raising the maintenance costs of leveraged funds and volatility risks, forcing the crypto market to become more conservative in pricing risk-reward under the dual pressures of the U.S. 5% interest rate anchor and Japan's retreat from easing.
Japan-U.S. Interest Rate Differential and Yen Carry: Reallocation of Crypto Leverage Funds
For a long time, Japan has adhered to ultra-loose monetary policy among major developed economies, maintaining extremely low rates, which has made the yen naturally the "funding currency" for global carry trades: leveraging against low-interest yen to buy high-yield bonds, stocks, or even BTC and ETH has been the standard script for macro funds over the past decade, with the Japan-U.S. interest rate differential being the core driving force of this script. As the U.S. raised interest rates in this cycle and locked in high rates, with the 10-year Treasury yield briefly shooting above 5%, and Bank of America directly anchoring the year-end expectations for 2-year and 10-year Treasuries at 5%, Goldman Sachs simultaneously raised its target for the U.S. dollar against the yen to 150 for the next 12 months, essentially telling the market: the high-state of the Japan-U.S. interest rate differential will be prolonged, and the "cheap money" story from yen funding is not over, but the direction is becoming less one-sided.
What genuinely unsettles carry traders is the subtle shift in internal consensus within Japan. Previously seen as an active proponent of re-inflation policies, Kadowaki's public announcement of the "end of the large-scale monetary easing era" implies that even though the current differential is still wide, the risks of tightening Japan's monetary policy path are already priced in. For leveraged funds reliant on yen carry, this will directly raise "tail risks": once the market begins to expect a strengthening yen and intensifying exchange rate fluctuations, long positions on the yen and many risk assets will have to unwind during periods of amplified volatility, with some choosing to reduce leverage overall, while others convert their funding legs from yen to dollars and other currencies, transferring pressure to funding costs more closely tied to Treasury rates. For macro accounts using cross-currency and cross-market leverage, this repricing will occur first in the foreign exchange and bond markets: unwinding yen carry positions will lock in partial profits or losses, which will then transmit through the risk control chain to crypto derivatives—BTC and ETH perpetual contract funding rates and futures basis will narrow synchronously within a short time, causing on-chain leverage rates to decline passively, and implied volatility to be raised anew. For crypto traders, what to watch next is not just the Treasury yield curve itself, but whether the contraction of yen carry positions and the rhythm of dollar funding substitution compress the leverage space in the crypto market synchronously, thereby pushing the directional trades of BTC and ETH towards a higher "liquidation sensitivity" range.
BTC, ETH and U.S. Assets Under High Rates and Retreating Easing
When Bank of America raised both the 10-year and 2-year Treasury year-end yield targets to 5%, coinciding with the previous instance where the 10-year yield touched 5.14%, the "duration label" for BTC and ETH within the global asset spectrum was reignited: under the combination of rising risk-free rates and Bank of America's forecast of Brent crude oil averaging $95 per barrel in the second half of the year, the market locked in expectations for higher nominal rates and inflation centers for a longer time, naturally increasing the discount pressure on high-volatility assets with highly uncertain future cash flows. For crypto pricing, this means not just simple short-term pullbacks, but an overall downward shift in valuation focus—under the same on-chain narrative and demand, the multiple that can support market capitalization has been compressed, and the premium on BTC and ETH as "long-term option" will be repeatedly discounted.
As U.S. Treasuries have been pointed to the 5% "new normal" by mainstream institutions, funds holding dollars face a much harsher horizontal comparison: on one side are high-rated bonds and high-dividend assets denominated in dollars, while on the other side are BTC and ETH, which have annualized volatility several times that of equities, relying on sentiment and liquidity cycles. The summary of Bank of America's viewpoint is straightforward: high rates lower the present value of future cash flows while increasing the appeal of dollar assets relative to high-volatility assets like cryptocurrencies—this means that some marginal dollars that previously flowed into the chains have begun to be "pulled back" to Treasuries and related products near 5%, making traditional funds' crypto positions lean more towards tactical rather than structural accumulation.
But another current is rewriting the leverage structure. Japan, long viewed as the last major stronghold of easing, with the yen being an important funding currency for global carry trades, has now seen Kadowaki publicly declare the end of the "Abenomics-style" era of re-inflation based on large-scale monetary easing and flexible fiscal policy. Adding to this is Goldman Sachs raising the 12-month dollar-to-yen target to 150, leading the market to interpret that the Japan-U.S. interest rate differential and yen funding environment are entering a period of repricing. For crypto, this means on one hand that cross-market leverage shorting the yen and arbitrage funds will be forced to deleverage, with some "mechanical selling pressure" and directional arbitrage positions potentially contracting; on the other hand, as rising risk-free rates compress valuation ceilings, and the contraction of yen carry clears leveraged positions, the holding structure of BTC and ETH may actually become cleaner in the medium to long term, leaving space for the next truly incremental-driven season rather than being pinned down in the shadows of high rates by overly crowded carry and short positions.
The End of Cheap Money: A New Pricing Era for the Crypto Market
From September 23 to 25, 2026, Bank of America synchronously raised the year-end yield forecasts for both the 10-year and 2-year Treasuries to 5%, while the 10-year yield had previously touched 5.14%. Hiroshi Kadowaki announced the end of the "Abenomics-style" era of re-inflation, Goldman Sachs raised the 12-month target for the U.S. dollar against the yen to 150, and Bank of America also projected the average price of Brent crude oil in the second half of the year at $95. These key threads quickly intertwined into a clear framework: high risk-free rates locked in, rising energy costs, and the repricing of the Japan-U.S. interest rate differential and exchange rate structure. For the crypto market, the pricing center is moving away from singular narrative rotations to focus on three hard constraints: first, risk-free rates and real yields on Treasuries determine discount rates and the competitiveness of "safe assets"; second, energy costs like oil prices change the marginal costs of computing, mining, and on-chain operations; third, the exchange rates and carry spaces of funding currencies like the yen reshape the costs and direction of cross-market leverage. What needs to be closely monitored next is whether the real yields on Treasuries can stabilize at high levels, whether the dollar-to-yen exchange rate continues to push towards the 150 target, and the synchronous changes in on-chain leverage and funding costs—before these variables are repriced again, the medium to long-term risk-reward ratios for BTC and ETH will also be forced to be recalculated, establishing new bull-bear dividing lines more prominently on interest rates and energy curves rather than in the next narrative.
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