Author
Ahmed Barakat
Author
Share it
In the latest news, Henry Paulson, who managed the US financial system until the fall of 2008 as Secretary of the Treasury, is. warning that the $35 trillion US debt could cause a collapse in the Treasury bond market, and called for a “break-glass” emergency plan to be ready before the deadline.
The transmission path to crypto is direct: trading against the currency strengthens the dollar quickly, and a strong dollar punishes potential crashes before Bitcoin’s history.
The 30-year Treasury yield has already crossed 5%, a level that was last breached in October 2023 during a period of inflation not seen since before the Great Recession. That is not an isolated warning. It’s a warning sign with Paulson’s words behind it.
Essentials:
- Who warned: Henry Paulson, US Treasury Secretary 2006-2009 and architect of the 2008 TARP bailout, issued a warning.
- What he said: Paulson described the possible collapse of the Treasury as having “bad consequences” – comparing the timing and hitting a “wall” unexpectedly due to the “law of financial difficulties.”
- What they want: A “break-glass” or “emergency brake” credit system is ready on the shelf before an emergency.
- Bond Market: The 30-year Treasury yield recently crossed 5%; The US debt has grown from $10 trillion in 2008 to $35 trillion by 2025.
- April 2025 example: Treasury yields rose sharply amid Trump’s rate hikes, defying expectations and the associated economic sell-off — a sign of the potential risk of a crash.
- Ways to send Crypto: A growing dollar economy, a shift in risk away from speculative assets, and a possible downward spiral in the crypto space.
- pushback: Treasury Secretary Scott Bessent dismissed similar warnings from JPMorgan CEO Jamie Dimon on June 1, 2025, calling his record for such predictions “bad”.
- Watch: The 10-year Treasury yield compared to 4.8% resistance, the upcoming Fed announcements, and the BTC and DXY correlation during each yield curve.
Note: The best crypto to change your profile
Bond News: How the Bond Market Really Shook Up to Crypto, and Which Items Are Hit the Most
The question is not whether Paulson is right about Treasury market fragility. It’s as if crypto trading as a safe haven or risk has been proven right, and history provides a clear answer, especially over time.
Unorganized Treasury sales cause the dollar to rise as investors dump bonds and demand cash. These changes hit the places with the first chance. Crypto markets, where Open interest in peripheral areas has been on the risehave this positive profile, the higher the exposure the higher the dollar value.
The April 2025 issue highlights this mechanism. As Treasury yields rose amid fears of inflation, crypto did not shift to safe havens. It was traded together with equities, against the digital-gold issue. Dealing with stored hazardous materials. It is a bear in one data point.
Paulson’s concern, that the demand for Treasuries can fall suddenly and without warning, driven by what he calls “the law of economic gravity”, implies a non-linear shock rather than a gradual decline in yields.
Non-linear hazards are what cascades are built for. A 10-year yield that jumps above 5% and is very fast is something to look out for.
Bitcoin Safe Haven or Risk-Off Casualty: What Bond Stress Means for Crypto Prices
The idea makes perfect sense. If bonds start to lose credibility, the capital has to go somewhere, and Bitcoin, with its unstable and non-independent nature, becomes the obvious alternative, which is why the big players keep the idea behind.
But that’s when people get caught.
In a real stock market, the first move is not a cycle; it’s dangerous, and at this point, everything is sold, including Bitcoin, like what happened in March 2020 when BTC went down a lot before going up.
Ethereum and other major altcoins are currently at technical levelsmaking them more vulnerable to economic shocks, which would be optional. ETH does not have the same strong financial issues as BTC and may not fare well in real risk driven credit stress.
A warning similar to Jamie Dimon’s, that investors seeking higher yields on Treasuries could raise interest rates without following the Fed’s policy, also underpins Paulson’s views in different ways. Bessent’s public firing of Dimon on June 1 shows that Washington is not in trouble. But bond markets are already at high prices that the Treasury Secretary doesn’t fully agree with.
Note: The best deals before the sale starts
