Bid-side support for risk assets is being tested again. After a single red weekly candle, the crypto market has fallen back to late-December levels, erasing all January gains and testing the strength of the market floor.
From a technical standpoint, this breakdown raises the risk of a deeper move lower. As geopolitical tensions continue to weigh on risk appetite, another October-style crash for Bitcoin [BTC] remains a real possibility.
If this cycle repeats, the 4.13% pullback we’ve seen so far this week could be just the beginning. Over the next 6–7 weeks, “continued” downside pressure could take Bitcoin toward an early-March target of around $60k.
Naturally, the key question is: What are the odds of a deeper breakdown?
Investors eye alternatives as Treasury returns shrink
Under the surface, a key catalyst is forming for Bitcoin.
A Danish pension fund announced that it will offload all its U.S. Treasuries by month-end, marking the first such move by a European fund. Notably, the fund cited “credit risk” under President Trump as the reason.
Backing this thesis, the U.S. dollar (DXY) is down 0.8% this week, retracing to early-January levels, as fears of a brewing U.S.–EU trade war take center stage. If this trend continues, it could act as a backstop for Bitcoin.
For context, a Treasury sell-off shows where investors are leaning.
With inflation pressures building amid ongoing geopolitical tensions, the real returns on Treasuries are shrinking, pushing investors to sell and seek assets that can keep up with rising prices. That brings us to Bitcoin.
So far, money hasn’t moved into risk assets, with investors piling into metals, which are hitting record highs. However, one key indicator suggests that this trend could shift soon, giving Bitcoin a chance to avoid a crash.
Market flows suggest Bitcoin could dodge a crash
Looking at the market, tariffs are starting to backfire.
From a macro view, these trade wars are a double-edged sword for the U.S. On one hand, Trump’s moves, like the Venezuela intervention and Greenland plan, could push big capital flows into markets, which is bullish.
However, the short-term impact is clear. The U.S. 10-year Treasury yield has jumped to 4.3%, the highest since early September. At first glance, it might seem like higher yields would cap risk flows, including Bitcoin.
That said, this 10-year yield is actually a key indicator in the current cycle.
As funds sell U.S. Treasuries, yields rise, making new bond issuance more attractive. For Trump, though, high yields on the massive debt load are the last thing he wants, especially during a midterm election year.
That’s why analysts call the 10-year yield the ultimate indicator.
Historically, when yields push into Trump’s “warning zone,” he typically moves to “pause” tariffs so bond markets can cool off. If that pattern holds, an October-style breakdown for Bitcoin to $60k still looks premature.
Final Thoughts
- Bitcoin’s downside risk remains, but a deeper crash isn’t confirmed. Yet, technical weakness and geopolitics are pressuring risk assets.
- Rising Treasury yields could force a policy shift that supports Bitcoin. As yields enter Trump’s “warning zone,” a tariff pause becomes likely, stabilizing risk assets.
