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Bitcoin’s (BTC) price has stayed above $80,000, even while global financial markets face pressure from new trade tensions. As the Nasdaq and other stock markets fall, many investors are now looking to Bitcoin as a possible safe-haven asset.
However, risks in the U.S. bond market, similar to those seen during the 2020 COVID-19 crash, could threaten this stability.
Bitcoin Holds Firm While Stock Markets Decline
Since President Donald Trump announced new tariffs on 180 countries, the Nasdaq has dropped 11%, raising fears of a trade war. Except for Bitcoin, global markets, U.S. stocks, and even gold have fallen. Although the asset briefly fell below $82,000, it quickly rebounded and is now above the $80,000 price.
Experts like David Hernandez from 21Shares said that Bitcoin may act as a “macro hedge” to protect against big economic risks. Analysts believe that as more people trust Bitcoin during uncertain times, its value could stay strong.
Some even said this trust could make Bitcoin a lasting safe-haven asset.
Traditional Bond Market Risks Remain
Despite Bitcoin’s recent strength, there are signs of trouble in the U.S. Treasury market. A risky strategy called the “basis trade” has grown in size. This trade involves hedge funds using large amounts of borrowed money to exploit small differences between Treasury futures and bonds.
This strategy failed in March 2020, when financial markets were shaken by the pandemic. Investors rushed to sell assets, including Bitcoin, to get cash. On March 12, 2020, Bitcoin dropped nearly 40% in a single day.
Robin Brooks, chief economist at the International Institute of Finance, said that high market volatility can lead to trade problems that use too much leverage. Brooks believes that if the bond market becomes unstable, it may trigger a large sell-off again.
The size of the basis trade has doubled since March 2020 and is now about $1 trillion. Many worry that even a small change in bond yields could cause big losses. If the bond market becomes more volatile, hedge funds may sell Bitcoin and other assets quickly, just like during the COVID-19 crash.
Volatility Index Signals Rising Risk
The MOVE index, which measures expected volatility in the U.S. Treasury market, rose 12% on Friday to 125.70. Notably, this is the highest level since November 2024. This sharp increase suggests that uncertainty is growing, and market stress may rise in the coming days.
A recent report from the Brookings Institution suggests the Federal Reserve may need to support hedge funds during times of stress to prevent serious disruptions in the Treasury market.
