For years, Wall Street criticized Bitcoin (BTC) for its volatility, but the situation has changed dramatically as President Donald Trump’s aggressive trade policy reduces the appeal to US assets.
Since Trump’s Liberation Day Tariff message on April 2, the seven-day realized volatility in the S&P 500, Wall Street’s Benchmark Equity Index, has increased from an annual 50% to 169%, according to data from TradingView. It is the highest level since the Coronavirus crash in 2020.
BTC’s seven-day realized volatility has doubled to 83%, yet it remains significantly lower than the S&P 500, suggesting Cryptocurrency’s possible development as a low-beta-hedge against stocks. Cryptocurrency also looks significantly less fleeting than the S&P 500 on a 30-day basis.
“Equity markets [have] experienced a dramatic increase in volatility – surpass the Bitcoin, which is currently seeing a decrease in volatility. This raises the question: Should investors put their confidence in assets that are highly susceptible to political influence and human error, or in a mathematical framework and the new value that is more resistant to such risks? “, Coinshares’ research manager James Butterfill said in an E email.
Investors are dumping US assets
The S&P 500 has cracked 14% in less than two months, largely due to the fear of trade wars recently fulfilled. The tech-heavy Nasdaq and Dow Jones Industrial Average have suffered similar losses along with increased volatility in global stock markets.
Historically, risk aversion of such sizes has investors park money in the Treasury that supports the global financial system and the US dollar, the global reserve currency.
But since last Friday, investors have aggressively dumped treasury notes, driving rates higher, and the dollar index has refueled. The so-called benchmark 10-year bond yield has risen by 62 basic points to 4.45% since last Friday, and the dollar index, which tracks Greenback’s value against larger currencies, has expanded its first quarter to 100, the lowest level since the end of September.
Currency typically appreciates when their national bond yield increases unless the markets are concerned about the country’s debt situation, in which case investors withdraw money from the bond markets, leading to an increase in yield and a simultaneous exchange rate. The global South witnessed this in 2018.
“Gives higher, currency lower is common in the European Championships. We saw this in Britain under the threat baker. But it is very abnormal for the United States: There are only four other episodes in the last 30 years when the dollar is written off more than 1.5% with the 30-year-old yield more than 10BP,” Evercore ISI said, according to the dollar chief, economic correspondent Nick Timaros.
“It reflects the evaporation of American growth exceptionalism and the reduced attraction in the margin of dollar assets for reserve purposes in the midst of erratic American decision making,” Evercore added.
