QCP: Bitcoin Not in Safe-Haven Favor, Participants Remain Defensive Until Clearer Situation Emerges
On April 16, QCP published its Daily Market Watch stating that the US demonstrated its strength and strategic brinkmanship by implementing shock and awe tactics through exaggerated tariff numbers. However, just as markets were preparing for the shock, the US government offered tariff exemptions and ‘invited’ China back to the negotiating table.
Why the sudden shift? Bond markets began to send warning signals. 10-year US Treasury yields spiked to 4.6% and 30-year US Treasury yields topped 5%, disrupting risk sentiment. Long-term yields will have to fall, not rise, if Trump hopes to drive a stock market rally during his term.
The sell-off in the bond market has intensified pressure on the Fed to intervene. It now appears to be approaching a turning point. Last week, the Fed said it was ready to act to stabilize financial conditions. Governor Waller further emphasized the shift, suggesting that the Fed’s attention is turning to recessionary risks, implicitly downplaying the problem of persistent inflation, which they now describe as ‘temporary’.
The Fed has previously applied the ‘temporary’ label to a variety of inflation cycles that are far from temporary. Nonetheless, the Fed’s protective mechanism is edging closer, with markets now expecting 3.5 rate cuts in 2025. Meanwhile, gold continues to rise as geopolitical tensions mount. As U.S. Treasuries and the U.S. dollar lose some of their traditional safe-haven appeal, gold is now the market’s preferred store of value.
Bitcoin, unlike gold, has not gained safe-haven demand. “The ‘alternative store of value’ narrative has failed to gain traction in the current macro environment. The stance of market participants remains skewed towards defense. They remain focused on hedging downside risks until a clearer picture emerges.