A sharp rise in credit spreads is once again casting a shadow over risk-on assets — historically a troubling signal for markets like equities and crypto. But this time, bitcoin (BTC) may be rewriting the script.
Credit spreads — the difference in yield between safe-haven government bonds and high-yield corporate debt — have surged to their widest levels since August 2024. That period saw a 33% drawdown in BTC, largely driven by a rapid unwinding of the yen carry trade.
One key indicator of this stress is the IEI/HYG ratio, which compares the iShares 3–7 Year Treasury Bond ETF (IEI) with the iShares iBoxx $ High Yield Corporate Bond ETF (HYG). According to analyst Caleb Franzen, this ratio is now spiking at a pace not seen since the Silicon Valley Bank collapse in March 2023 — a moment that marked a significant bottom in bitcoin around the $20,000 level.
Historically, such spikes in credit spreads tend to coincide with pullbacks across risk assets, as they reflect mounting investor caution and tighter financial conditions. The widening spread suggests that investors are demanding more compensation to hold riskier debt — a red flag for bullish positioning in equities and crypto alike.
The crucial question: has the worst of the credit stress already been priced in, or is this the early stage of a deeper risk-off shift?
Despite the warning signs, bitcoin ended last week on a strong note, outperforming major stock indices. The asset’s resilience has fueled speculation that it’s beginning to break free from traditional market correlations. Some market watchers are even calling BTC the new “U.S. isolation hedge” — positioning it as a digital macro safe haven in times of geopolitical and economic stress.
Still, if credit spreads continue to balloon, the pressure on high-risk corners of the market could intensify. Whether bitcoin can maintain its independence in that environment remains a major test in the week ahead.
