Analyst: Market Should Monitor US Treasury Yield Volatility, Bitcoin May Be Affected by Bond Market Basis Trading

BlockBeats News, April 6th — Coindesk analyst Omkar Godbole stated that since Wednesday when Trump announced the launch of retaliatory tariffs, the Nasdaq has dropped by 11%. However, the price of Bitcoin has remained relatively stable, holding above $80,000, with Bitcoin's resilience seen as a sign of its gradual evolution into a macro hedge tool.

Nevertheless, intense short-term downward volatility cannot be ruled out, especially due to sharp fluctuations in bond prices. The "bond market basis trade" faces significant risks. Basis trading involves highly leveraged hedge funds, with reports indicating leverage ratios as high as 50x, leveraging arbitrage opportunities based on tiny price differences between bond futures and securities. In mid-March 2020, as the COVID-19 pandemic threatened the global economy, basis trading saw explosive growth, leading to a market "dash for cash," where investors sold off nearly all assets to acquire USD liquidity. On March 12, 2020, Bitcoin plummeted by almost 40%.

Therefore, the market needs to monitor bond yields. Increased volatility in bond yields could trigger a market crash similar to that during the COVID-19 pandemic, resulting in a massive sell-off of assets, including Bitcoin, to acquire cash.