Treasuries are amplifying market selloffs and Bitcoin is paying the price

An important story is making waves across the blockchain ecosystem. For two decades, the American investor essentially got a free insurance policy. When equities fell, Treasuries rallied, and the loss on one side of the portfolio was partly covered by the gain on the other. That relationship became so reliable that an entire industry built products on it, and an entire generation of allocators started treating it as a given.

However, it stopped working around 2020, and it hasn't really worked since. UBS now puts the two-month rolling correlation between the S&P 500 and the 10-year Treasury yield at -0. 69, the lowest reading since 1996.

Market Dynamics

That means stocks and bonds are moving together to a degree not seen in thirty years, and the asset that exists to offset an equity loss has now become a source of one. What's a safe haven now if bonds aren't? It's easy to say that the reason why bonds and equities have converged is that investors lost faith in US government debt.

However, as always, the answer is much more complicated than that. The data tells us that investors still want the safety they got from bonds, but now they want it without the duration. Duration is the sensitivity of a bond's price to a change in interest rates.

A 30-year Treasury protects the holder from default in nominal terms and exposes them completely to inflation and to the path of policy rates. Even though those are two different risks, the distinction didn't really matter after the financial crisis of 2008, because inflation was mostly dormant. Once we start seeing inflation go up, the hedge breaks apart.

Market Impact

The correlation between stocks and bonds doesn't depend that much on the actual level of inflation, but on its volatility. It also depends on what drives the markets: news about growth or news about inflation. When growth dominates, equities and bonds respond in opposite directions, because weaker growth hurts stocks and helps bonds.

When inflation dominates, they move in the same direction because higher inflation hurts both of them equally. Research at AQR found that this explains roughly 70% of the long-term variation in the US stock-bond correlation, with similar results internationally. Since 2022, inflation has been the dominant input, and it has remained dominant longer than we've ever seen.

Even a cooling inflation print, like the June report that pulled headline CPI to 3. 5% and left long yields drifting back toward 5% at the 30-year, didn't change anything, because the volatility of inflation is the problem rather than any single reading of it. The 30-year Treasury yield crossed 5% for the first time since 2007, has spent much of 2026 above that line, and sits near 5.

Crypto markets are watching this development closely as investors weigh its potential impact on prices.