The yield on the 10-year Treasury bond fell to 4% as the DXY weakened - Is it time to buy Bitcoin?

On April 3, the long-term U.S. government bond yield fell to its lowest level in six months as investors reacted to concerns about the global trade war and the weakening of the USD.

The yield on the 10-year Treasury bond has reached 4.0% in a short period, down from the 4.4% threshold a week earlier, signaling strong demand from buyers.

! U.S. 10-year Treasury yields (trái) against Bitcoin/USD (phải) | Source: TradingViewAt first glance, higher recession risks seem to be a negative signal for Bitcoin. However, lower returns from fixed-income investments will encourage investors to allocate capital to alternative assets, including cryptocurrencies.

Over time, traders may reduce their exposure to bonds, especially if inflation rises. Therefore, Bitcoin still has the potential to reach a new peak in 2025.

Tariffs Create a Supply Shock in the United States and Impact Inflation and Fixed Income Returns

The recently announced import tariffs by the United States have negatively affected the company’s profits, forcing some to reduce leverage and subsequently decreasing market liquidity.

Any measures that increase the level of risk aversion tend to have a negative impact in the short term on Bitcoin, especially considering this asset’s strong correlation with the S&P 500 index.

Axel Merk, the portfolio manager at Merk Investments, stated that tariffs create a “supply shock,” meaning a reduction in the ability to supply goods and services due to price increases causing an imbalance with demand. This effect is amplified if interest rates decrease, potentially paving the way for inflationary pressure.

Source: AxelMerkThe attractiveness of fixed income investments also significantly decreases in such a scenario. If only 5% of the 140 trillion USD capital in the bond market seeks higher returns elsewhere, that would equate to 7 trillion USD of potential capital flowing into stocks, commodities, real estate, gold, and Bitcoin.

The USD weakens as gold prices reach ATH benefiting alternative assets

Gold surged to a market capitalization of 21 trillion USD as it continuously set new peaks and still has significant growth potential.

Higher prices allow previously unprofitable mining activities to continue and encourage further investment in exploration, mining, and refining activities. As production expands, the growth of natural supply will act as a limiting factor on the long-term price increase of gold.

Regardless of the interest rate trends in the United States, the USD has weakened against a basket of foreign currencies, as measured by the DXY Index.

On April 3, the index fell to 102, the lowest in six months. The decline in confidence in the USD may encourage other countries to explore alternative stores of value, including Bitcoin.

US Dollar Index (DXY) | Source: TradingViewThis transition does not happen overnight, but the trade war could lead to a gradual shift away from the USD, especially in countries feeling pressured by the dominance of this currency.

Although no one expects a return to the gold standard or Bitcoin to become a main component of national reserves, any move away from the USD would trigger the long-term price appreciation potential of Bitcoin and solidify its position as an alternative asset.

Japan, China, Hong Kong, and Singapore together hold $2.63 trillion in U.S. Treasury bonds. If these regions choose to retaliate, bond yields could reverse trends, increasing the cost of issuing new debt for the U.S. government and further weakening the USD. In such a scenario, investors may likely avoid exposure to stocks, ultimately prioritizing scarce alternative assets such as Bitcoin.

It is very difficult to determine the bottom of the Bitcoin market, but the fact is that the support level of $82,000 is still being maintained despite the increasingly worsening global economic situation, which is a encouraging sign of the leading asset’s resilience.

You can see the price of BTC here.

Disclaimer: This article is for informational purposes only and should not be considered as investment advice. Investors should do thorough research before making any decisions. We are not responsible for your investment decisions.

• Bitcoin challenges the $80,000 level, forming a ‘death cross’ as US stocks mirror the COVID-19 crash of 2020.
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• What can be expected from ETH in April?

Viet Cuong

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