Key Points:

• Bitcoin’s volatility has lessened when compared to the S&P 500, indicating its development into a low-risk alternative compared to stocks.
• A downturn in U.S. assets has led to increased Treasury yields and a drop in the dollar index.

For years, Bitcoin faced criticism from Wall Street due to its instability, but circumstances have shifted significantly. The aggressive trade policies under President Donald Trump are diminishing the attractiveness of U.S. investments.

Following Trump’s announcement about tariffs on April 2, the realized volatility of the S&P 500 catapulted from an annualized 50% to 169%, marking the highest fluctuation since the COVID-19 pandemic-induced market crash.

Bitcoin’s volatility for a seven-day period has surged to 83%, yet it remains substantially lower than that of the S&P 500, suggesting its evolving role as a low-risk hedge against stock market movements.

Quote: “Equity markets have seen a clear spike in volatility—exceeding that of Bitcoin, which is experiencing reduced fluctuations. This poses the question: should investors rely on assets that are highly influenced by political actions and errors, or opt for a mathematically-driven and progressively valuable alternative that is less vulnerable to these risks?”

Translation: “Equity markets have seen a clear spike in volatility—exceeding that of Bitcoin, which is experiencing reduced fluctuations. This poses the question: should investors rely on assets that are highly influenced by political actions and errors, or opt for a mathematically-driven and progressively valuable alternative that is less vulnerable to these risks?”

In less than two months, the S&P 500 has dipped by 14% largely due to the fears manifesting from ongoing trade disputes. Similarly, the tech-heavy Nasdaq and the Dow Jones Industrial Average have experienced comparable losses amidst heightened volatility across global markets.

Investor reluctance of this scale often drives money into Treasury bills, which are foundational to the global financial landscape, and the U.S. dollar, recognized as the reserve currency.

However, following a recent Friday, a notable sell-off in Treasury notes has led to rising yields, while the dollar index plummeted. The benchmark 10-year bond yield has increased by 62 basis points to 4.45%, and the dollar index has dropped to 100, a low not seen since late September.

Changes in yields and currency values usually happen inversely; when bond yields rise, currencies usually strengthen, unless fears about a country’s debt grow, which can pull money out of bonds, leading to both rising yields and declining currency values. This occurrence was evident in 2018 within the Global South.

Quote: “Higher yields, lower currency is a common trait in emerging markets. We observed this in the UK during the Truss crisis. Yet, for the U.S., this is a rarity: there have only been four instances in the last 30 years when the dollar fell more than 1.5% while the 30-year yield rose over 10 basis points.”

Translation: “Higher yields, lower currency is a common trait in emerging markets. We observed this in the UK during the Truss crisis. Yet, for the U.S., this is a rarity: there have only been four instances in the last 30 years when the dollar fell more than 1.5% while the 30-year yield rose over 10 basis points.”

This trend reflects a waning U.S. growth exceptionalism and an increasing diminution in the appeal of dollar-denominated assets for reserve usage amidst fluctuating U.S. policy decisions.