Paulson Warns Bond Market Crash Could Tighten Dollar Liquidity and Hit Crypto

Former U.S. Treasury Secretary Henry Paulson warns a potential bond market crash could worsen conditions for crypto by rapidly tightening dollar liquidity. Paulson points to the U.S. $35 trillion debt load and calls for an emergency “break-glass” contingency plan. He ties the risk to market mechanics: a disorderly sell-off in Treasuries can tighten USD liquidity quickly, and historically that environment pressures risk assets—often before any “safe-haven Bitcoin” narrative can fully form. Paulson highlights that 30-year Treasury yields have moved above 5% (a level last seen in October 2023 during an inflation-driven spike), and notes the timing uncertainty can make the impact feel like hitting “the wall.” For context, the warning is framed against recent rate and risk-off dynamics: U.S. Treasury yields surged sharply around periods such as the April 2025 tariff escalation, coinciding with equity weakness and challenging the assumption that Treasuries always behave as a haven. Crypto transmission channels traders should watch: tighter USD liquidity, a rotation away from speculative exposure, and potential cascading liquidations in leveraged crypto positions. Pushback also appears in the article, with Treasury Secretary Scott Bessent dismissing comparable warnings from JPMorgan CEO Jamie Dimon. Traders may monitor 10-year yields near key resistance levels, upcoming Fed communications, and BTC’s correlation to the DXY during any yield spike. Bottom line: a bond market crash risk is presented as a near-term liquidity shock that can turn risk-off fast for BTC and other high-beta tokens.