GS Crypto: Bitcoin Resilience

Investors are grappling with ongoing tariff-induced policy uncertainty, tightening financial conditions, and increasing US recession risks. Over the past three weeks, fluctuating news headlines have impacted equity and bond markets, pulling them in both directions. The performance of the traditional 60:40 portfolio—60% stocks for higher returns and 40% bonds for stability—has been significantly affected (Figure 1). Recently, as equity markets declined, traditional safe-haven assets like bonds (with higher yields) and the USD also weakened (Figure 2). In the past month, gold has emerged as a standout appreciating store of value, while Bitcoin has demonstrated resilience since the beginning of the month.

Since the "Liberation Day" tariffs announcement on April 2nd, Bitcoin has risen by 8%, whereas NDX and SPX are both down by 5% (Coinmetrics, Bloomberg). Although Bitcoin initially dipped to $76,700 following the announcement, it has impressively recovered to $94,000 today (Figure 3). Bitcoin rallied on April 21st due to President Trump's perceived dissatisfaction with Federal Reserve Chair Powell. The rally continued the next day as Cantor Fitzgerald, Tether Holdings, Softbank Group, and Bitfinex announced plans to create a $3 billion investment vehicle, emulating Michael Saylor’s Bitcoin investment strategy (The Block). Equity markets have further recovered as the US President seemed to ease trade tensions with China and retracted earlier comments about the Fed Chair.

Bitcoin futures basis is rising again, approaching 10%. As Bitcoin's spot price climbs above the $90k level, the futures premium basis has increased to annualized levels of 9-10%. The market appears to be re-engaging in the basis trade—long spot/ETF versus short futures/NDF—driven by significant $900 million inflows into US spot Bitcoin ETFs over the past few days, which have coincided with the basis increase. Aside from this, ETF flows have been relatively low throughout the month.

The 1-month implied volatility in Bitcoin is currently at the lower end of the 1-year range, slightly under 50 vol, while the 1-month realized volatility has been around 60. Structurally, the 25 delta risk reversals for the front 3-month tenors have shifted, with calls moving higher.