U.S.-listed Bitcoin ETFs are on track for their second-largest monthly outflow in history, with over $800 million set to leave the funds in April. This comes after record losses of $3.56 billion in February and $767 million in March, signaling a continued retreat by institutional investors.
Despite vocal crypto advocates who argue that tariff-driven volatility in the U.S. Treasury market highlights the fragility of the dollar system, institutions remain hesitant to follow this narrative. Last week, a popular social media account coined the phrase, “Sell bonds, buy Bitcoin,” reflecting this sentiment. However, institutions are prioritizing bonds over digital assets.
In stark contrast to the outflows from Bitcoin ETFs, demand for U.S. Treasury bills remains strong. On Monday, the U.S. Treasury auctioned $80 billion in three-month bills at an interest rate of 4.225%, slightly up from 4.175% in the previous auction. Similarly, $68 billion in six-month bills were sold at 4.06%, just above the previous rate of 4.00%.
The bid-to-cover ratios for these bills were notably high, with three-month bills seeing a rise to 2.96 from 2.82, indicating nearly three times as many bids as bills offered. The six-month bills also saw an increase in the ratio to 2.90 from 2.79, demonstrating strong institutional demand for U.S. debt.
This robust demand highlights that institutions continue to see U.S. debt as a safe haven, especially in times of economic uncertainty. Treasury bills are highly liquid and low-risk, making them the preferred choice for collateral in the repo market, where institutions engage in short-term borrowing using T-bills.
The continued preference for Treasury bills over Bitcoin ETFs comes as uncertainty in the global economy intensifies. President Trump’s aggressive trade policies have added to market volatility, with potential blackouts in corporate earnings guidance looming. According to Bank of America, its 3-month guidance ratio has dropped to 0.4x, the lowest since April 2020, reflecting the increased uncertainty.
Additionally, the odds of a U.S. recession have climbed above 50% on betting platforms, further dampening risk appetite, while rising Japanese bond yields add additional pressure on risk assets.
