Here’s what you’ll find in today’s edition:

• Treasury yields spiked overnight. Wall Street is trying to figure out why. 

• How COIN and other crypto equities are faring amid stock market volatility.

• While markets continue reacting to tariffs, lawmakers are back to work on crypto policy. 

Trade war hits Treasurys 

As equities posted a modest rebound, it was US Treasury markets that had Wall Street worried this morning. 

The 10-year yield climbed above 4.51% around midnight, just as President Trump’s 104% tariff against Chinese imports went into effect. The question on everyone’s mind now is why. 

I know I wrote yesterday that foreign bond holders could be selling, and this is still a possibility. But the overnight moves point to a perhaps more frightening reality: The basis trade is unwinding. 

Hedge funds frequently employ a Treasury basis trade strategy. It’s an arbitrage trade that looks to exploit the tiny price differences between Treasurys and futures. It’s low-risk and low-reward, but huge when leveraged — so funds typically borrow to fund these trades and multiply their bets.

Mass selling causes Treasury yields to spike (like we saw last night). The lower the price falls (remember Treasury prices and yields are inversely correlated), the more margin calls we see and the more selling we see to meet those calls. Plus, liquidity evaporates when the number of sellers is vastly greater than buyers. 

“If it’s not a case of selling winners to pay up margin elsewhere, then maybe it’s a market bracing for a deep recession that would start with a 7% deficit that will then only get worse,” Pepperstone research strategist Michael Brown said. “I’m honestly not sure which of those scenarios is worse.”

So either way, bad. As Joseph Wang said: “This might become a legitimate market functioning issue.” 

We saw an unwinding in 2020. Yield on the 10-year went from a record low of 0.3% to 1.2% in a matter of days in March 2020. The Fed intervened with quantitative easing on March 23, 2020, and by the end of the month the 10-year yield had retreated back to around 0.7%. 

There is a little bit of good news, though: The Treasury’s 10-year auction today was strong. Indirect bidders, which represent an imperfect proxy for foreign buyers, made up about 88% of accepted bids (higher than the average). 

In yesterday’s three-year auction, 73% went to indirect bidders. Direct bidders however were down 45% from January.  

We don’t know exactly who is selling, which is why you’ve seen a lot of speculation around what’s fueling the selloff in Treasurys (including in this newsletter). The Treasury reports foreign holder data monthly, but there’s a six-week lag. We won’t get February’s holdings until next week. 

We also don’t know what the Fed will do. Odds of an interest rate cut in May actually decreased today, hovering around 38% after spiking to 45% yesterday, per CME Group data. 

You’ll be the first to hear, though, when we have some answers. In the meantime, maybe take a screen break.

— Casey Wagner

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The Fed won’t onboard the next billion users. Rates won’t fix UX. Monetary policy won’t push your code to prod.

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📅 June 22–26 | Brooklyn, NY

The increase in the price of gold since the start of 2025. 

Gold climbed to a record high above $3,100 per ounce last week but was trading below $3,000 at times on Monday and Tuesday. The metal was at $3,070 at 1:30 pm ET — up 2.6% on the day. 

These movements highlight the difference in perception between the metal and the so-called digital gold known as bitcoin, which is trading 25% lower than the high it hit in January.

You know what the stock market is doing broadly. And how BTC has trended lower too. 

But what about crypto equities — particularly the one many deem to be the purest of them all?

Coinbase’s stock price hovered around $165 at 1:30 pm ET — down 35.6% year to date. That’s worse than BTC and the Nasdaq Composite index, which have decreased 13.6% and 15.2%, respectively, since the start of 2025.

Still, Cantor Fitzgerald kicked off its coverage of Coinbase by giving the crypto exchange’s shares a buy rating and a $245 price target.

“We expect we will soon see a ‘ChatGPT’ moment when it comes to Web3, and there is, in our view, no better way to play this dynamic than COIN given it has its hands in virtually every aspect of the crypto ecosystem,” Cantor Fitzgerald analysts wrote in a Tuesday note. 

They highlight the “robust” user growth on Coinbase’s layer-2, Base. And the potential for Coinbase’s stablecoin revenue ($910 million in 2024) to grow as stablecoins have a chance to displace traditional cross-border payment rails. 

“As such, we expect COIN's business to be perceived less as a cyclical trading platform and more as a mission-critical infrastructure layer of the crypto economy,” the analysts wrote.

Morningstar analyst Michael Miller’s current fair value estimate for COIN remains at $170. He said in February he believed the company’s shares were “overvalued.” When I connected with Miller this morning, he said he now sees the stock as “slightly undervalued.”

“The obvious caveat here is that Coinbase's business remains heavily exposed to cryptocurrency valuations,” Miller noted. “It has significant influence on their trading revenue and a direct impact on their custody and staking revenue, as those segments generate revenue based on assets held.”

As for other stocks tied to crypto, Strategy (MSTR) and Marathon Digital (MARA) are down 9.3% and 33.2% YTD. Galaxy Digital, which we noted yesterday could go public in the US next month, is down 48%. 

Meanwhile the share price of Robinhood, which saw crypto revenue of $358 million in Q4 2024, is right about where it was at the year’s start.

— Ben Strack

Global markets may be in absolute turmoil, but the world keeps spinning. 

Representatives on the House Financial Service’s Digital Assets Subcommittee met today for a hearing on US crypto policy. That topic may not be top of the news cycle, but is still big in Washington. 

Rep. Brad Sherman from California, who has long been skeptical of any legislation deemed “pro crypto,” had an interesting take. “New coins” will overtake “old coins,” he said, and he’s all for new coins. We aren’t sure at all what he means here, but we think he’s saying he’d like to see some disruption in the crypto space. 

The hearing comes after six Financial Services Committee Democrats voted to advance the House’s STABLE Act last week. The legislation is similar to the GENIUS Act in the Senate (which also received bipartisan support), but the House’s version gives more power to state regulators to oversee issuers. 

The next step for both bills will be a full floor vote. Should the trade war continue to escalate, we expect crypto legislation will move to the back burner. Still, insiders on the Hill tell us stablecoin legislation should be the first crypto measure to pass. Up next is market structure, which has the industry much more divided. 

Meanwhile, in the Senate, Paul Atkins’ nomination to the SEC today passed the cloture vote, 51-45. The final vote could be scheduled as soon as this evening.

— Casey Wagner

• President Trump said in a Wednesday Truth Social post he would be raising the tariff charged to China to 125%, effective immediately. He also revealed a 90-day pause on other reciprocal tariffs, sending the Nasdaq 10% higher in a matter of minutes. For updates on tariffs and its impact on markets, check Blockworks.co.    

• US bitcoin ETFs endured net outflows of $326 million on Tuesday, Farside Investors data shows — the highest single-day total since March 11. Ether ETF flows have been roughly flat over the last four trading days.

• The SEC roundtable — titled “Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading” — is taking place Friday. Check out the list of panelists here.