The ongoing crypto price recovery can be attributed to a group of investors known as the bond vigilantes, a term coined by economist Ed Yardeni.
These vigilantes are investors who often keep the government in check by selling bonds when there is a significant policy change. By selling their bond holdings, these investors typically push yields high and make it expensive for the government to borrow.
The rally mirrored the stock market’s performance. US stock indices, such as the Dow Jones and the Nasdaq 100, have all jumped by over 10% from their monthly lows. International indices like the German DAX and French CAC 40 have also jumped.
Earlier this month, President Donald Trump delivered his Liberation Day speech. The highest levies were applied to China, but a baseline 10% tariff was applied across the board with additional reciprocal tariffs that vary by nation.
But Trump blinked after so-called “bond vigilantes” sprung into action. Investors essentially sold off bonds to pressure the government to reverse course.
“The Bond Vigilantes have struck again,” wrote Yardeni. “As far as we can tell, at least with respect to U.S. financial markets, they are the only 1.000 hitters in history.”
US bond yields went higher, with the 10-year Treasuries hitting 4.585% and the 30-year retesting 5% for the first time since January.
The rising bond yields meant that the US public debt servicing would go up. Also, they meant that the president would likely fail in his plan for massive tax cuts. Significant unfunded tax cuts would have pushed bond yields higher.
Trump commented on the bond market bluntly:
“The bond market is very tricky. I was watching it.”
Crypto rallies
Bitcoin (BTC) price rose and retested the important resistance at $95,000 for the first time in over a month. Brett (BRETT), the biggest meme coin on the Base blockchain, jumped by 95% in the last seven days.
Other top coins, such as Virtual Protocol (VIRTUAL), Official Trump (TRUMP), Sui (SUI), and Dogwifhat (WIF), have all jumped by over 50% in the last seven days. As a result, the market cap of all coins jumped to $3 trillion.
Bond vigilantes also contributed to Trump’s decision to abandon firing Jerome Powell from the Federal Reserve.
The U.S. president cannot legally remove the Fed chair without cause.
If the Supreme Court allowed such a move to stand, it would have led to a lack of confidence in U.S. bonds and the greenback. It would have also likely pushed bond vigilantes to dump Treasuries again.
Trump also hinted that he was ready to strike a deal with China, even though China denied talks were taking place.
Therefore, crypto prices may continue to rise in the coming weeks as tariff risks ease, and the odds of Federal Reserve cuts increase.
