The 10-year Japanese government bond yield has already broken through 2.22%, and it continues to rise. This signal is somewhat dangerous — US bond prices are likely to fall sharply, and mortgage rates will soar accordingly. Coupled with the potential depreciation pressure on the dollar, consumer prices will only get more expensive. What lies ahead is an unprecedented stagflation storm, and we need to be mentally prepared.

What exactly is stagflation? Simply put, it’s an economy that is neither growing nor experiencing low unemployment, while prices keep rising rapidly. This situation is the most challenging for policymakers — when the economy is weak, stimulus is needed, but stimulus can fuel inflation further; to curb inflation, interest rates must be raised, which can push the economy into a downturn. It’s a dilemma with no easy way out.

In recent months, the market has also been clearly reacting to these concerns. An interesting phenomenon can be observed: the divergence between Bitcoin and gold. Gold prices have soared to new highs, indicating that traditional safe-haven funds are rushing in. Meanwhile, Bitcoin’s performance has not been as buoyant, showing a clear divergence on both sides.

This divergence actually reflects the market’s true sentiment — some funds still trust traditional safe-haven assets like gold, and are becoming more cautious about risk assets. But there are also voices that believe, in an environment of extreme inflation and dollar depreciation, cryptocurrencies might be the ultimate hedge. How to position oneself depends on how you assess the severity of this wave of risk.