Last week, President Donald Trump’s assertive tariff measures caused market turmoil, with cryptocurrency holders facing significant losses as trillions were erased from global stock markets.
On Monday, Bitcoin’s value saw a slight rebound after it dipped below $75,000 earlier in the morning. The cryptocurrency is now trading around $80,000, marking a 3% increase within the last 24 hours.
However, further fluctuations are expected as investors maneuver through the shifting global economic landscape under Trump’s administration. Monitoring U.S. bond markets is crucial.
As noted by macro analyst and cryptocurrency expert Lynn Alden on X, bond yields rose on Monday while stock prices fell. But what does this mean for crypto investors or Bitcoin enthusiasts?
“There’s a multitude of factors that don’t fit into a simple narrative,” remarked Michael Lebowitz, a portfolio manager at RIA Advisors, in an interview with Decrypt. “It’s likely that as people sold their stocks, they no longer needed the hedge of bonds and sold those too.”
“I’m always cautious about oversimplifying, such as suggesting that perhaps China was selling, or that there’s a perception that tariffs will lead to inflation, given the tremendous volatility in these markets,” he added.
When investors purchase U.S. treasuries, they receive a yield. As the demand for treasuries increases, the yield decreases; conversely, when demand wanes, yields rise.
The yield spike on Monday, especially for the 10-year note, indicated a drop in demand for U.S. treasuries. This often occurs when investors sell treasuries to liquidate cash, a typical safe haven, as other assets lose value—in this case, stocks.
Generally, rising yields signal expectations of stronger growth or increased inflation, while declining yields suggest a flight to safety or a dimmer economic outlook.
Market Forces
Experts conveyed to Decrypt that the rise in yields is indicative of tougher market dynamics, chiefly slow growth and expectations of rising inflation.
Greg Magadini, Director of Derivatives at Amberdata, warned that Trump’s tariffs could act as “direct contributors to inflationary pressures.”
“There is another concerning risk—what if our international creditors start protesting against purchasing treasuries?” he queried.
In other words, as nations retaliate against Trump’s stringent tariffs, they might sell off U.S. treasuries.
“The increasing yields amidst falling equities convey a distinct message: The market believes the Fed has limited options,” Mike Cahill, CEO of Douro Labs, expressed to Decrypt.
“If inflation remains persistently higher than anticipated, central banks might have no choice but to maintain tighter conditions for an extended period,” he added, noting that this scenario is “not beneficial for risk assets.”
Typically, Bitcoin and the broader cryptocurrency market have moved in tandem with other risk assets, such as technology stocks, thriving in a low-interest environment.
Though Bitcoin experienced a dip on Monday, its response to the rising bond yields was not as pronounced as it was for stocks.
Matthew Sigel, head of digital assets research at VanEck, shared with Decrypt that while the 10-year Treasury yields soared on Monday, Bitcoin’s reaction was “notably subdued.”
“Unlike in 2022, rising yields did not bring about a wave of forced liquidations or turmoil in the crypto markets, indicating that BTC may be diverging from past macro correlations,” he concluded.
The idea of divergence—that Bitcoin is no longer trading in sync with tech stocks—is gaining traction on Crypto Twitter again. Is this phenomenon finally occurring?
Edited by Sebastian Sinclair
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