Bitcoin (BTC) is solidifying its dominance in the cryptocurrency market and gaining prominence as an alternative to U.S. Treasuries, which are traditionally viewed as the foundation of the American financial system and among the largest, most liquid markets globally. This trend suggests that some investors may be willing to take on additional risk in search of higher returns.
Last week, as Bitcoin approached its all-time high of over $73,000 reached in March, it traded at a staggering 800 times the value of BlackRock’s iShares 20+ Year Treasury Bond ETF (TLT). This ratio has increased from 466 during Bitcoin’s previous peak in November 2021.
U.S. Treasuries, backed by the credit of the world’s largest economy, are considered some of the safest assets available. They are held by numerous central banks as reserve assets due to their reputation as a reliable store of value and serve as a benchmark for global interest rates. Generally, as yields rise, prices fall, and vice versa.
This situation may pose challenges for some investors. Since interest rates began to rise during the COVID-19 pandemic, we have entered a period of economic uncertainty, with rates unlikely to revert to 0% due to persistent services inflation, a nearly $2 trillion budget deficit in the U.S.—equating to almost 100% of GDP—and ongoing geopolitical conflicts in Eastern Europe and the Middle East.
The lack of incentives for price gains may explain why the ETF, which manages $60 billion in total assets, has experienced a 7% decline this year, while Bitcoin has surged by 55%. This performance disparity could indicate that investors are reallocating portions of their portfolios from long-term Treasuries to Bitcoin.
Given Bitcoin’s fundamental properties and the notable success of U.S.-listed spot ETFs this year, it appears to be emerging as a relatively safe asset for some global investors amid continuing economic uncertainty.
Bitcoin’s recent rally has also increased its share of the total cryptocurrency market capitalization to a new cycle high of 60.56%. For crypto investors, this could indicate a risk-off strategy, as they offload holdings in riskier alternative cryptocurrencies (altcoins) in favor of the market leader ahead of the U.S. elections.
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