After the U.S. Treasury bond market experienced a rare "period of insufficient liquidity," Secretary of the Treasury Besant took the initiative to explain the expansion of bond repurchases: it is to support the market during tight liquidity, and since the repurchase expansion began, the 30-year yield has not risen significantly—indicating a clear government signal to actively suppress long-term rates. Meanwhile, when asked whether he agreed with the Federal Reserve's interest rate hikes, he deliberately avoided a direct statement, only publicly emphasizing his confidence in Fed Chairman Walsh and pushing the ultimate decision on the interest rate path back to the monetary authorities. More impactful for the market, he simultaneously emphasized that "core inflation has not risen" and pointed out the strong current correlation between bonds and energy, while also admitting he could not determine how long the conflict in Iran would last, but bluntly stated that once the conflict ends, rates should decline or be lowered, tying geopolitical conflict, energy prices, and future interest rate expectations together. At this moment, long-term yields, inflation expectations, energy prices, and the situation in the Middle East are all on the table: the Treasury is buying the curve, the Fed is leading the rate hike narrative, the Iran conflict becomes a geopolitical switch for the future direction of rates, and the crypto market must answer how these intertwined fiscal and monetary signals could change the allocation logic and volatility structure of BTC, ETH, and on-chain U.S. dollar funds through interest rate expectations and risk preferences.

Treasury Repurchases Stabilize Long-term Rates: Yield Anchors Discounting Risk Assets

As liquidity in the long-end curve started to dry up, the Treasury chose to use repurchases to "revive" the market. Besant explained that the current objective of the repurchase expansion is not to create a new round of easing but to use the official balance sheet to take over the long-term Treasuries that have been sold off and for which no one is willing to bid during the "period of insufficient liquidity," thereby lowering the liquidity premium and stabilizing the 30-year yield. The result is that since the repurchase expansion began, Besant can emphasize externally that "the 30-year yield has not risen significantly": the long end has not spiraled out of control, and the discount rate shock remains locked within a controllable range. This is a key signal for all risk assets benchmarked against U.S. dollar long-term rates—the risk compensation can continue to fluctuate around the existing range, rather than being forced to reassess overall in a "new interest rate world."

For high-duration assets, this "not significantly rising" long-term yield essentially means the discount factor has not been raised again: the pressure of discounting future cash flows and forward risk premiums is limited, and equity, growth assets, and even BTC and ETH, treated as "technology-like stocks," have seen their valuation center lacking a strong forced discount. The repurchase here acts as a stabilizer—supporting the long end with official buying on one side, while allowing bond market yields to remain elastic to variables like energy and the Iran conflict, avoiding a passive rate hike-induced surge in yields. Under this balance, the relative attractiveness between traditional bond markets and crypto assets is also being rearranged: as the 30-year yield is "anchored" by the Treasury, the upper limit on risk-free returns offered by bonds is implicitly constrained, and marginal funds are no longer forcibly drawn away by high long-term rates. The opportunity cost of holding high-volatility, long-duration assets like BTC and ETH decreases, and for on-chain U.S. dollar funds, the long-term repurchase brings a temporarily suppressed discount rate, creating a window where risk premiums can continue to be negotiated.

Treasury and Federal Reserve Understanding: Ambiguous Forward Guidance on Interest Rate Paths

When pressed on whether he agreed with the Federal Reserve's continued interest rate hikes, Besant deliberately stopped at the edge of discourse: he did not give a direct answer of "agree" or "disagree," instead repeatedly emphasizing his confidence in Fed Chairman Walsh and pointing out that Trump felt the same, fully pushing the responsibility for interest rate judgments back to the monetary authorities. For the market, this represents a typical "ambiguous signal": the Treasury is intervening in the shape of the yield curve through repurchases and statements on long-term yields, while maintaining distance from policy rates, not pre-committing to either rate hikes or cuts. The result is that terminal rates and future interest rate paths are no longer locked down by a single narrative, broader ranges for interest rate distributions emerge, and macro uncertainty is "respected" nominally, but translates into increased volatility for risk assets in pricing.

This combination of "understanding and distance" impacts the crypto market through the restructuring of leverage and term structures: as forward guidance on interest rates becomes ambiguous, the forward discount factors for BTC and ETH begin to be frequently reassessed, long-cycle bulls can no longer support high leverage positions on stable interest rate assumptions, and the derivatives market is more inclined to compress risk into short durations. Leverage utilization in futures and perpetual contracts shifts from long durations to short durations, narrowing the premium range for longer-dated contracts, and on-chain U.S. dollar funds reduce their investments in long-term carry, pivoting to trading structures driven by short-term volatility and events. In a world where the interest rate path is "deliberately unclear," the crypto market pays for this macro noise with shorter durations and higher implied volatility.

Iran Conflict and Energy: Resonance Between Bond Market and Crypto

Besant directly ties the next step for long-term rates to the geopolitical rope of the Iran conflict: he admits he cannot determine how long the conflict will last but clearly states that once it ends, rates should decline or be lowered. This is not an abstract political statement, but rather a message to the bond market—that the current high rate premiums incorporate some Middle Eastern risk premium. He emphasizes that "the current correlation between bonds and energy is exceptionally strong," and while core inflation "has not risen, and all relevant indicators remain unchanged," long-term yields remain influenced by geopolitics and oil prices, indicating that the marginal driving forces of inflation expectations and the Fed's path are shifting from traditional data releases to speculation about energy and conflict developments.

Within this framework, BTC and ETH are forced to play a dual role: on one hand, when long-term yields are elevated by geopolitical risk, and the official line maintains "core inflation remains unchanged," some funds will treat them as "macro insurance" against sovereign and inflation expectation imbalances; on the other hand, as long as headlines related to Iran lift the oil yield combination, the overall risk assets' duration sees a discount, and BTC and ETH are immediately sold off in high beta form, reflecting a discounting reaction to tighter financial conditions. On-chain U.S. dollar funds tend to shorten their holding periods during this "oil price-bonds-interest rate" triple resonance, using futures and perpetuals to increase the weight of event-driven trades, allowing spot market values to bear the tail risk of geopolitical conflict. Therefore, the current crypto market is essentially paying a volatility premium for the dual uncertainties of the Iranian situation and the resonance between oil prices and interest rates.

The Bet on Downward Interest Rates: Positions of BTC and On-Chain U.S. Dollars

Besant's blunt statement that "once the Iran conflict ends, rates should decline or be reduced" alongside his repeated emphasis that core inflation has not risen provides the market with a narrative for early bets: the current tight financial conditions resemble a "geopolitical premium," and once oil prices and energy risks retreat, there is room for long-term yields to decline. Under this framework, traditional funds begin to restructure their portfolios—allocating more to longer-duration bonds, lowering the discount rates for equity and high beta assets, while redistributing risk budgets between the stock market and crypto: buying U.S. Treasuries on signals of "supporting" long-term rates with bond repurchases, while treating BTC and ETH as long-dated options on future easing, preemptively betting on the story of rate cuts.

If long-term yields fall further after geopolitical stabilization, high-volatility assets face a dual repricing of reduced discount rates and compressed risk premiums: the same forward growth expectations are pushed to higher prices under lower rates, and the dollar cost of leveraged funds also decreases, easing the "duration discount" pressure on BTC and ETH, with price fluctuations returning more to risk preferences rather than purely interest rate shocks. For on-chain U.S. dollar funds, this gamble turns into a redistribution between "cash equivalent—short-duration income products—crypto yield opportunities": as offline risk-free return expectations decline, funds that have been sitting on cash and short bonds will be driven to seek scenarios with higher risk premiums, from on-chain lending spreads, market making fees to basis trades, all appearing more attractive under expected downward interest rates. As a result, part of conservative funds remains in cash and short bonds, guarding against tail risks of energy and geopolitics, while more aggressive funds leverage BTC, ETH, and on-chain yields to extend duration, using positions to hedge whether Besant's signal of "conflict end, rates down" ultimately materializes.

AI Defense Narrative and Crypto Technology Interaction

As interest rates and the Iran conflict are constantly repriced, Besant throws out another clue: "laboratories need to take responsibility for artificial intelligence, and the U.S. must maintain a leading position in AI defense and resilience." This is not a set of specific regulatory provisions; rather, it is a prioritization of tech security: in an environment where bonds and energy are highly coupled and geopolitical risks are rising, AI is explicitly incorporated into the framework of "defense and resilience," effectively providing a policy endorsement for future capital expenditures on AI and its related infrastructure. On the traditional asset side, the market will naturally convert these statements into longer-lasting demand expectations for cloud computing, data centers, cybersecurity, and chips even if nominal rates remain relatively high, as risk assets along the tech chain gain relatively higher tolerance compared to other sectors.

This "tech security—AI defense" narrative can easily be replicated in the crypto technology sector through risk preferences: at one end are AI leading stocks and infrastructure companies, while at the other are crypto projects tied to the AI narrative, high-performance public chains, decentralized computing, and storage networks. As funds seek balance between long-term rates and geopolitical variables, they often adopt a structure of "centered on BTC and ETH, edge in AI technology"—most positions use BTC and ETH to capture macro beta, while marginal funds rotate trading between AI stocks and "AI + crypto" baskets. When the market understands Besant's statements as indicating that the U.S. will continue to invest resources in AI defense, this rotation logic gets reinforced: once expectations for interest rate declines overlap with the AI security narrative, the overall discount rates of the tech risk chain are lowered, amplifying the elasticity of high beta AI crypto assets relative to BTC and ETH, although internal divisions within the sector will also widen.

Looking at Long-term Rates or the Gunfire from Tehran

Besant's recent remarks effectively cast three keys for the market: first, through expanding repurchases to keep the 30-year yield in a "not significantly rising" range, the long end is artificially anchored, providing a temporary floor for the discount rates of all risk assets; second, the deliberate ambiguity around whether to raise rates, coupled with continued support for Walsh and the acknowledgment that core inflation has not risen, signals "path not stated, but additional tightening thresholds are high"; third, binding the Iran conflict directly to expectations for lower rates, while pointing out the exceptionally strong correlation between bonds and energy, places geopolitics and oil prices at the core of interest rate pricing. Together, these three factors reshape the risk preferences for BTC, ETH, and on-chain U.S. dollar funds: when the long end is suppressed and the likelihood of rate hikes is discounted by the market, high beta narratives gain prominence, and on-chain U.S. dollars are more likely to pursue leveraged long positions and options volatility trades; when the Iranian situation remains unresolved and the strong linkage between energy and interest rates raises tail risks, the "risk-averse narrative" returns, with BTC being treated as a hedging tool, ETH and long-duration tracks experiencing profit-taking, and funds flowing back to short-duration rate strategies and low leverage structures. What will matter next is whether the 30-year yield remains suppressed by repurchases and statements, whether the Iran conflict and energy prices will break this anchor, and how the Federal Reserve and the Treasury recalibrate rate expectations in their next statements; these three clues will determine the amplitude and rhythm of the next round of fluctuations in BTC, ETH, and on-chain U.S. dollar funds.

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