A single data series is a decades-long experience in portfolio theory. On May 29, André Dragosch, head of European research at Bitwise, released a chart showing that the 60-day rolling correlation between Bitcoin and 10-year futures of the U.S. Treasury Department has collapsed to the most negative reading of the record.
Bitcoin and the US 10-year US fiscal futures
“This is probably the most important macro chart for Bitcoin at the moment… Bitcoin’s 60-day correlation with US 10-year-old Treasury futures has dropped to its lowest ever. Do traditional investors sell US Treasury bonds to buy Bitcoin?” he wrote, constructing this extent as a watershed for asset allocation.
Dragosch’s follow-up line stimulated this. “Our Treasury bonds are broken; there has been structural damage to the inter-market correlation since at least 2022… Bitcoin is an alternative portfolio insurance for sovereign defaults because foreigners’ unparalleled assets are foreign investors… Foreign investors… From our Treasury bonds increasingly equal Bitcoin to Eastcoin, it is from our huge assets away from the United States – compared to Bitcoin, it is a market for companies that are more and more than Bitcoin. Sovereign bonds are used as alternative storage of value.”
The structural cracks he quotes are real. Bitwise’s March “Macro Fault Line” report records the deepest bear markets in modern history (more than 40% shrinkage) and the once-stabilizing correlation between bonds, commodities and foreign yields. The study nails the inflation shock after 2022, fiscal flaws and the shift of diplomatic reserve managers from U.S. debt.
BTC exposes cracks in the system
Bloomberg’s Asian Wealth Survey last week confirmed immigration: High net worth clients, once über-long tollar Paper, are spinning into gold, Chinese assets and cryptocurrencies, while China and other large holders continue to revise Treasury bills to support alternative reserves. Meanwhile, the premium of the term “bond investor” for the 10-year notes failed to gradually rise with the deficit, suggesting potential liquidity risks.
Bitcoin has grabbed the May U.S. spot bitcoin ETF to win a record $6.35 billion in net assets, only increasing BlackRock’s IBIT to $71 billion in assets under management. These traffic arrive even if it stumbles by chance, with the bonds price exceeding the yield on when to issue and prompting investors to demand higher duration risk compensation.
Relevance backed up Dragosch’s paper. BITWISE data shows that BTC’s connection to Treasury bonds is now weaker than gold, but cryptocurrencies have historically outperformed gold bars when bond prices plummeted, and its attraction is the attraction of “portfolio insurance” amid Sovereign-debt drags.
None of these guarantees one-way transactions. BITWISE itself warns that stricter financial situations can still self-encrypt prices, while BTC maintains meaningful links to risky assets during an acute stock sell-off. But the travel direction of sovereign debt forces investors to look elsewhere for something that cannot be defaulted or devalued. As Dragosch said, “We are gone, higher.”
For traditional portfolio managers, whose models are still anchored on an active fiscal hedge, charting Wall Street “don’t want you to see” is more than just curiosity, which shows that the 60/40 paradigm is split. Longer bond markets struggle to fulfill their historic haven role, loud Bitcoin could become digital, holder assets insurance.
At press time, BTC was trading at $105,780.
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