The yield on the 10-year Treasury note recently fell to 4.0% amid trade war concerns and a weakening US dollar. Despite potential recession risks, lower bond returns may drive investment toward Bitcoin, maintaining its long-term growth potential. Tariffs create a supply shock affecting market liquidity, while gold’s ascent further emphasizes the appeal of Bitcoin as an alternative asset. The geopolitical environment could lead to a gradual move away from the US dollar, benefiting Bitcoin’s valuation.

On April 3, the yield on the 10-year US Treasury note dropped to 4.0%, its lowest in six months, amidst rising concerns about the global trade war and a weakening US dollar. This decrease in yield from 4.4% the previous week indicates heightened demand from investors, who may be shifting allocations toward alternative assets such as cryptocurrencies due to lower returns from fixed-income securities.

While a potential economic recession generally poses a threat to Bitcoin (BTC), reduced returns from bonds may lead investors to consider cryptocurrencies more favorably. This investor behavior suggests that even amid inflationary pressures, there remains a plausible path for Bitcoin to reach an all-time high by 2025, as traders offset diminishing bond exposure.

The recent imposition of US import tariffs has raised concerns regarding corporate profitability, which may compel companies to reduce their debt levels, thus impacting market liquidity. This increase in risk aversion could temporarily affect Bitcoin negatively due to its correlation with the S&P 500 index. Axel Merk, chief investment officer at Merk Investments, suggests these tariffs create a “supply shock,” leading to diminished availability of goods and destabilizing demand relative to supply, particularly in a declining interest rate environment.

Even for those who do not consider Bitcoin a hedge against inflation, the attractiveness of fixed-income assets diminishes amid rising prices. If merely 5% of the $140 trillion global bond market reallocates to seek higher returns, it could result in a substantial $7 trillion inflow into various asset classes, including Bitcoin.

Gold’s recent ascent, reaching a market capitalization of $21 trillion, has resulted in historical price highs and suggests the potential for further growth. Such price increases may rejuvenate mining ventures and stimulate investments in various stages, though growth in supply could eventually temper gold’s long-term rally. Concurrently, the recent decline of the DXY Index to a six-month low of 102 exemplifies the weaker US dollar against currencies worldwide, potentially motivating investors to diversify into alternative assets like Bitcoin.

This transition away from the dollar is anticipated to be gradual, particularly for nations feeling pressured by the US’s dominance. Although a complete return to the gold standard or Bitcoin occupying national reserve spaces is unlikely, a shift away from the dollar presents a favorable scenario for Bitcoin’s long-term value retention and growth.

The geopolitical landscape is vital to consider, as countries like Japan, China, Hong Kong, and Singapore collectively possess $2.63 trillion in US Treasuries. If these nations decide to retaliate against US policies, bond yields may strengthen again, raising new debt costs for the US government and resulting in a further weakening dollar. In such instances, investors are likely to prefer scarce assets such as Bitcoin over equities.

Although pinpointing the exact bottom in Bitcoin’s market is a formidable challenge, the fact that the $82,000 support level has remained intact despite intensifying global economic uncertainties reflects a significant resilience for the cryptocurrency. This analysis serves solely as informative content and should not be construed as legal or investment advice, representing the author’s independent views rather than those of Cointelegraph.

In summary, the recent decline of the 10-year Treasury yield to 4.0%, coupled with concerns over the US dollar and inflation, suggests that alternative assets like Bitcoin may become increasingly attractive to investors. Rising tariffs have implications for corporate profitability, potentially affecting market liquidity and Bitcoin’s short-term outlook. Despite challenges, the shift away from traditional assets and resilience shown by Bitcoin supports its long-term prospects as a viable alternative investment.

Original Source: cointelegraph.com

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