As a result, the U.S. Treasury market is on fire. It’s fallen over 2% this week alone, it’s largest loss since September 2019. A sudden liquidity crunch rocked the repo market, sparking the first wave of losses. This issue is not dissimilar from the conditions that prompted Federal Reserve intervention years ago. On top of all this, unpredictable former U.S. President Donald Trump’s arbitrary tariff declarations and retractions have left their own wake of confusion. With the USD dollar weakening, Bitcoin is putting in a near-term bottom around $80,000 that is raising hopes of a big breakout ahead.

Treasury Market Turmoil

There is growing concern that the U.S. Treasury market is crashing. This decline is due to a liquidity squeeze in the repo market, similar to what happened in September 2019. At the time, the Federal Reserve had to step in to calm the market. An unintended consequence from market analysts argue that Trump’s erratic trade policies have injected far more uncertainty into the Treasury market. These policies have been characterized by brash tariff bluster and rapid backtracking.

Trump started by threatening sweeping tariffs on all of America’s trading partners. He walked back a lot of these actions for certain countries, leaving China as the main target. On April 11, the benchmark U.S. 10-year Treasury yield shot up over 4.59%, its highest level in two months. It did see its biggest weekly drop in more than two years.

Dollar Weakness and Bitcoin's Potential

Compounding the pressure on the U.S. Treasury market is the recently tanking U.S. dollar. The U.S. Dollar Index (DXY), which tracks the dollar’s strength against the basket of seven major foreign currencies including the euro and the pound. In fact, for the first time since 2022, it is currently below the 100.

As shown below, a declining DXY has been one of the most bullish signals for Bitcoin historically. As one analyst pointed out, this means that the weaker dollar is likely correlating with Bitcoin’s short-term performance.

"A falling DXY has typically been a strong bullish signal for Bitcoin" - Venturefounder

Bitcoin's Bullish Outlook

As this economic uncertainty continues to develop, Bitcoin is proving itself across the board. The digital currency has reached the now-familiar bottom at the $80,000 mark. This divergence is causing some to think it’s preparing for a big breakout to the upside. The broader Treasury market is in the midst of a selloff, and the dollar is falling. These three factors combined are setting the perfect stage for Bitcoin.