Bitcoin (BTC)'s recent stability amid the Nasdaq turmoil promoted by tariffs has created excitement among market participants regarding the potential of cryptocurrency as an asset for shelter. Still, the Bulls may want to keep an eye on the bond market where the dynamics that characterize the March 2020 Covid crash could emerge.
NASDAQ, a Wall Street high-tech index known to be positively correlated with Bitcoin, has fallen 11% since President Donald Trump announced mutual tariffs on Wednesday on 180 countries, widening trade tensions and portraying retaliatory taxes from China. Other US indexes and global markets have been assaulted along with sudden losses and gold pullbacks in risky currencies such as the Australian dollar.
BTC is largely stable, continuing to trade over $80,000, and its resilience is seen as a sign of evolution into macro hedges.
“The S&P 500 has dropped by about 5% this week as investors are facing a headwind in trade-driven revenue. Bitcoin, meanwhile, shows impressive resilience. After temporarily falling below $82,000, it quickly rebounded and strengthened its position as a macro hedge. 21Shares' Crypto Investment Specialist told Coindesk in an email.
The recognition of stability quickly transformed into a self-fulfilling prophecy, cementing BTC's position as a Haven Asset for years to come, as pointed out by X.
Ministry of Finance Trade Risk
However, it cannot be reduced in the short term, especially as “financial market-based trade” faces risks due to rising turbulent bond prices.
The basic transactions include highly leveraged hedge funds reportedly operating at a 50-1 leverage ratio, taking advantage of a mild price discrepancy between the Treasury futures and securities. The trade exploded in mid-March 2020, threatening the coronavirus to derail the global economy, leading to a “dash for cash” in which investors sell almost all their assets for dollar liquidity. On March 12, 2020, BTC fell nearly 40%.
“When market volatility spikes – as it is now – it unearths highly utilized carry trades vulnerable to large-scale market movements. The US Treasury explosion in March 2020 is an example of recent fares.
According to Zerohedge, the risk is realistic as positioning leads to a $600 million shift in the value of bets, as the size of the base transaction at the end of March is doubled, and because the tally is doubled, positioning leads to a $600 million shift in betting value.
Therefore, an increase in Treasury yield volatility could lead to an explosion like COVID, and widespread sales of all assets, including Bitcoin, could win cash.
On Friday, the Move Index, which represents the 30-day volatility, which represents the implied or expected 30-day volatility on options-based in the U.S. Treasury market, jumped to 125.70, the highest since November 4th, according to data source TradingView.
The severity of the situation is highlighted by a recent Brookings facility paper. This emphasizes the Federal Reserve to consider targeted interventions in the US Treasury market.
Let's take a look at the situation last week.
