Former US Treasury Secretary Henry Paulson warned that Washington needs to prepare contingency plans if demand for US Treasury bonds plummets, as the impact could be very adverse.
He told Bloomberg that the U.S. needs an “emergency window of opportunity” plan, designed to be narrow and short-term, to be activated in the event of a crisis. Currently, the U.S. Treasury bond market is worth approximately $31 trillion, while government debt has exceeded $39 trillion.
Impact on cryptocurrencies and stablecoins
In the short term, a shock to the sovereign debt market could drive yields higher, tighten global liquidation , and put selling pressure on Bitcoin and other altcoins.
In the long term, this scenario could drive capital flows toward non-sovereign store-of-value assets such as Bitcoin or gold. However, risks to stablecoins are also mentioned, as 63% of Tether 's reserves are held in US Treasury bonds and 10% in overnight repurchase agreements.
The yield on 10-year US Treasury bonds is currently at 4.3%. Bitrue research representatives suggest that Bitcoin could solidify as "digital gold" if Capital flows out of debt-based assets.
