Concerns Over Expanding U.S. Deficit, Weak Demand for 20-Year U.S. Bonds Weigh on U.S. Stocks, Bonds, and Dollar
Amid ongoing concerns about the expanding U.S. deficit and the dismal auction of 20-year U.S. Treasury bonds, U.S. stocks, bonds, and the dollar all weakened. Bitcoin, undeterred by the decline in risk assets, strengthened on its own. Progress in U.S. stablecoin legislation has sparked hopes for regulatory clarity, leading Bitcoin to reach a historic high of 110,797 this morning.
Investor Concerns over U.S. Deficit, Weak Demand for U.S. Bonds
Weak demand for $16 billion in 20-year bonds has reignited concerns over U.S. government borrowing and budget deficits, putting pressure on the dollar. This situation has weakened market sentiment following a significant rebound in risk assets over the past month, exposing structural concerns in the bond market.
Due to worries about the ever-expanding U.S. debt and deficit, traders are betting that long-term bond yields will surge, and Moody’s downgraded the U.S. credit rating to below AAA last Friday. Former U.S. Treasury Secretary Steven Mnuchin expressed greater concern about the expanding budget deficit than trade imbalances, urging Washington to prioritize fiscal restoration. He stated during a panel discussion at the Qatar Economic Forum on Wednesday:
The budget deficit worries me more than the trade deficit. I hope we can indeed cut spending further.
Bitcoin Breaks Through 110K, Setting New High
Bitcoin has risen independently, undeterred by the decline in risk assets. The progress of U.S. stablecoin legislation has sparked hopes for regulatory clarity, leading Bitcoin to set a historic new high. (U.S. GENIUS Act Fully Regulates Payment Stablecoins: Issuance Thresholds, Reserve Standards, and Regulatory Systems All in One Go)
This morning, Bitcoin reached a historic high of 110,797. During the financial market turbulence triggered by Trump’s trade tariffs, Bitcoin was referred to as a safe haven by some market participants. As difficulties in U.S. budget negotiations have focused attention on deficits and expenditures, this characterization has gained increasing traction.
Michael Novogratz, founder and CEO of Galaxy Digital, stated in an interview with Bloomberg:
When this country is burdened with such debt, our situation is really very difficult. You will see long-term Treasuries being sold off, the dollar under pressure, and this is also good for Bitcoin and crypto assets.
Open interest in Bitcoin futures, held by CME Group Inc., has rebounded 23% from its year-to-date low in April, while investors have poured approximately $3.6 billion into U.S. Bitcoin ETFs so far in May. Year-to-date, Bitcoin has risen about 14%, outperforming other risk assets like U.S. stocks.
Risk Warning
Investing in cryptocurrencies is highly risky, and their prices can be extremely volatile, potentially resulting in a total loss of principal. Please assess risks carefully.