Historic Turning Point: Bitcoin is Becoming a Safe-Haven Asset

This week, U.S. Treasury bonds experienced the largest single-week fall since the 2019 repo crisis, with volatility even surpassing the levels during the COVID-19 pandemic in March 2020. Even more concerning is that the severe fluctuations in the Treasury market pose a risk of large-scale liquidations for basis arbitrage funds, reminiscent of the situation during the liquidity crisis in March 2020: at that time, many hedge funds were forced to sell other assets to raise liquidity, leading to a freeze in the repo market and multiple circuit breakers in U.S. stocks. So, is the abnormal volatility in U.S. Treasuries a further release of risks from Trump's tariff war or the beginning of a major crisis?

From a trading perspective, the current fluctuations in U.S. Treasury bonds still fall within the category of regular risk release. There are three main reasons:

First, the widening of the term spread has led to clearing pressure that remains confined to the basis strategy area, and has not yet spread to systematic strategies such as CTA trend following or risk parity funds.

Secondly, the money market remains stable - the Federal Reserve's reverse repurchase agreements (RRP) have a balance of nearly $500 billion, providing a liquidity buffer, and the overnight repurchase rate and SOFR spread continue to stay within the normal range of 10 basis points.

Thirdly, the 10-year yield fluctuates in the range of 4.25%-4.5%, with a safe margin from the 4.8% threshold that triggers duration hedging for MBS investors. Based on these phenomena, the Federal Reserve still characterizes the current volatility as "the normal operation of the market's self-regulatory mechanism."

As long as systemic risks do not erupt, the benefits of Bitcoin in the second phase of the trade war are almost a foregone conclusion.

First, Trump's tariff policy will significantly weaken the dollar's dominance in global trade settlements and accelerate the diversification of the international payment system. With the deepening of de-dollarization, the proportion of local currency settlements such as RMB and ruble will continue to increase, and gold and Bitcoin will become important value anchors. For example, in order to alleviate the depreciation pressure of the ruble after Russia's foreign exchange reserves were frozen by the West in 2022, the Central Bank of Russia implemented a gold fixed-price purchase policy (5,000 rubles/gram) from March 28 to June 30, which not only successfully stabilized the ruble exchange rate, but also surged its gold reserves by 300 tons.

It is worth noting that during the same period, the trading volume of Bitcoin in Russia surged 17 times, forming a dual-track value storage system of "official gold + private Bitcoin." As the United States gradually reduces or even halts the deficit output of the dollar, this new structure may become an important supplement in the process of de-dollarization.

Secondly, the Trump administration may emulate the operational model of the 1985 'Plaza Accord' by using tariff leverage to force major trading partners to accept a devaluation arrangement for the dollar. This 'high tariffs + weak dollar' policy combination, while capable of enhancing the competitiveness of American manufacturing, will inevitably erode the credit foundation of the dollar.

Historical experience shows that when the market forms a sustained expectation of dollar depreciation, hard currencies with 'super-sovereign' attributes often perform outstandingly—during the period from 1985 to 1987 after the Plaza Accord was signed, the dollar depreciated against the yen and the Deutsche Mark by 50% and 47%, respectively, while the price of gold rose from about 300 dollars per ounce to around 500 dollars, an increase of approximately 66%. This process facilitated the reallocation of trillions of dollars in assets. In the past decade, Bitcoin has exhibited a significant negative correlation with the dollar index, thus Bitcoin is likely to strengthen during the dollar's downward cycle.

Historically, high-quality safe-haven assets must meet two core criteria: significant positive risk premium and controllable price fluctuations. Over the past decade, gold has been the only asset that consistently meets these two requirements, while Bitcoin has long been excluded from the safe-haven asset category due to its excessive volatility during extreme market conditions (such as a 37% daily fluctuation in March 2020). However, this traditional understanding is being challenged by new market data. During the market turmoil caused by Trump's tariff policy, the performance of various assets showed significant changes.

From April 2 to April 8, the risk-adjusted return of Bitcoin was -0.24, which not only exceeded the S&P's -0.98 but was also better than gold's -0.29. This shift indicates that Bitcoin is developing a unique "crisis alpha" characteristic—although the absolute volatility remains higher than gold, its relative performance during systemic risk events has begun to surpass traditional safe-haven assets.

In addition, although the VIX index soared to its highest point in nearly three years (60), the one-month implied volatility of Bitcoin only increased slightly, still far from its historical high. At the same time, there is no significant correlation between the price of Bitcoin and the implied volatility of its at-the-money options. This indicates that the market generally believes that the potential impact of a sharp decline in the US stock market on Bitcoin is limited, and options investors have not heavily exploited this event to go long on volatility, breaking the past market consensus that Bitcoin is a leverage for US stocks.

Looking back, the timing of Trump's establishment of a Bitcoin strategic reserve is certainly not coincidental - it is both a forward-looking layout to hedge against the credit risk of the dollar and a strategic move to maintain global monetary dominance. However, as the market gradually sees through the strategic intentions of the United States, American capital has quietly accumulated nearly 30% of the circulating Bitcoin chips.