Bitcoin Faces Risk From Basis Trade Unwind, Analysts Warn

In Brief:

Analysts caution that a $1T "basis trade" unwind in U.S. Treasuries could lead to broad asset sell-offs.

Bitcoin has remained stable during recent volatility but may not be immune if a liquidity crunch unfolds.

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Amid sharp volatility in the U.S. stock market triggered by new tariff policies, Bitcoin has shown surprising resilience—fueling hopes that it might act as a hedge in uncertain times. But analysts are warning that this stability could be short-lived if a deeper systemic risk plays out in traditional finance.

According to a report from CoinDesk, the rising volatility in U.S. Treasury prices could threaten the "basis trade"—a popular hedge fund strategy involving simultaneous short-selling of futures and buying of government bonds to profit from price differentials. With over $1 trillion tied to this trade, any disorderly unwind could create a ripple effect across global markets.

Analysts say that if the basis trade unravels, it could spark a liquidity crisis similar to what occurred in March 2020, when a $500 billion unwind caused a widespread sell-off. In such a scenario, even assets perceived as hedges—like Bitcoin—could see a sharp decline as investors rush to raise cash.

Although Bitcoin has remained above $83,000 in recent sessions, observers caution that it remains vulnerable in a broader liquidity event. Market participants are now closely monitoring bond markets and macro risk indicators for any signs of stress that could spill over into crypto.

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