As US, Japanese, and European sovereign bond yields surge to multi-decade highs, investors are increasingly turning to safe havens such as gold (GC=F) and bitcoin (BTC-USD) to preserve capital and hedge against the growing risk of stagflation

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In an exclusive conversation on Yahoo Finance Future Focus, Hidden Road director of liquidity management Gary Murphy unpacked why faith in fixed income is wavering and where the smart money is flowing instead.

Bond yields in US Treasuries are soaring to levels not seen in over three decades, reflecting a shift in global financial markets.

“We have seen yields rising in recent months, and the curve has been steepening across the board. I think the recent downgrade by Moody’s of the US debt is an acknowledgement that, the fiscal outlook in the US and globally, is deteriorating and this, coupled with, the tariffs that have been imposed, the worries about inflation stoking up again, has central banks bracing for, a potential stagflation scenario,” Murphy told Yahoo Finance UK.

He pointed to an array of catalysts — newly imposed tariffs, rekindled inflation fears, and central banks bracing for the possibility of stagflation.

“All of this, coupled with the recent volatility across all traditional asset classes has driven investors to look to look elsewhere, because of that, assets like gold and bitcoin in particular have begun to catch on recently,” he added.

While gold has long been the go-to inflation hedge, bitcoin’s (BTC-USD) surge to fresh all-time highs reflects its growing acceptance as “digital gold.”

Historically, the crypto market was dominated by niche funds and unregulated exchanges. However, today, a broad range of institutions, from pension funds to Wall Street market makers, are embracing digital assets.

So what’s driving this shift in the current macroeconomic environment?

Read more: Why UK can leapfrog EU and US on crypto, according to Coinbase exec

“The participants entering the space in the past two to three years are vastly different from those of a decade ago,” Murphy said. “You’re seeing tier-one market-structure names make meaningful investments.”

He highlighted stablecoins as a case in point — in 2024, more than $27tn of stablecoin volume flowed on-chain, surpassing even Visa (V) and Mastercard’s (MA) combined volumes.

“I think for a long time, the kind of narrative was that institutions are coming into the digital space, but particularly this year, 2025, the institutions are here,” Murphy said.