(Bloomberg) — To many on Wall Street, it’s still heresy. An asset born from anti-establishment myth, tainted by fraud and bad actors, not only survives — it thrives. Never mind the endless grift, exchange hacks, and more.
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And yet this week, as the Treasury market rebelled against Donald Trump’s “big beautiful bill” — bringing the equity market rebound to a halt — crypto looked like the adult in the room. While stocks, government bonds and corporate credit sold off on fiscal fears, Bitcoin rallied almost 5% amid a market pattern with no real precedent. Another insult to orthodoxy: crypto deepened its institutional street cred as DC policymakers normalized dollar-linked tokens for mainstream use.
Treasuries — long the ballast of diversified portfolios — proved a big loser in a week marked by rising fears of fiscal profligacy. By contrast, Bitcoin briefly surpassed $112,000 for the first time, poised for its sixth weekly gain in seven.
None of this is to say Bitcoin is safe or a reliable diversifier. But facts are facts. Allocators are starting to believe, with the largest ETF tracking the world’s original digital currency nabbing $10 billion this year. Like it or not, the number keeps going up.
“It’s hard to keep fighting it, or at least not acknowledging it as a viable asset class,” said Rich Weiss, the 65-year-old chief investment officer for multi-asset strategies at American Century Investment Management. “Maybe that’s enough to get haters like me to jump on the train because in our business, you cannot fight the tape forever.”
It was a week that losses piled up across old-school markets — stocks, bonds and credit posted the worst synchronized selloff since March, going by the major exchange-traded funds tracking them. The dollar slipped, on course for a fifth straight monthly decline — the worst streak in almost five years. Traders instead flocked to an asset whose connection to the economic cycle is tenuous.
That may have been a virtue this week. Bond yields rose globally — 30-year rates touched 5.09% — amid concern sovereign finances are being stressed by President Trump’s push for deglobalization. In the US, fears were fanned by a poorly received 20-year bond auction, Moody’s downgrade of the country’s credit rating and House passage of a multi-trillion-dollar tax plan few see doing much to tame the deficit.
“It’s the initial rumblings. It’s the market warning the US government that something has to change,” said David Schassler, head of multi-asset solutions for investment manager VanEck. “If we’re going to be in a situation where there’s going to be a flight out of the dollar, fixed income and stocks at the same time, then you want to bias your portfolio towards decentralized assets.”
Crypto isn’t subverting the political or financial system. It’s getting plugged in through legislation, ETFs, custodians, model portfolios, and more. And that’s fueling faith in digital assets as a strategic allocation.
As stablecoin legislation advanced in Congress and Trump welcomed meme-coin enthusiasts to a private dinner in Washington, Bitcoin rose five straight days before paring gains Friday. The online currency is now up 16% in 2025, compared with losses of around 1% in the S&P 500 and 3% in the iShares ETF (TLT) tied to long-dated Treasuries.
This week marked the second time in a month that Bitcoin rallied while traditional asset classes retreated — a cluster of divergences with no precedent in Bloomberg’s dataset going back to 2010.
Particularly notable was the parting in prices between crypto and equities, which tend to reflect similar risk appetites, according to Owen Lamont, a portfolio manager at Acadian Asset Management. With stock investors in retreat — perhaps anticipating higher inflation and borrowing costs courtesy of Trump’s tax policy — Bitcoin sailed along, reaching levels that some see as unsustainable.
“It’s like there’s a crypto thing, which is crazy, and the US stock market, which is like pretty normal,” Lamont said. “It is indisputable that we have an extremely high policy uncertainty. And policy uncertainty is not generally a good thing for the stock market or the economy.”
The split in sentiment was also visible in the ETF space. Crypto enthusiasts continued to pile in, with BlackRock Inc.’s iShares Bitcoin Trust ETF (IBIT) luring more than $2 billion of fresh money during the week through Thursday. Over the same stretch, traders pulled back from the riskier edges of the stock market, as ProShares’ triple-leveraged Nasdaq 100 ETF (TQQQ) — a popular vehicle among day traders — saw sharp outflows amid a broader retreat from aggressive equity bets.
Flows into crypto may reflect a broader belief: that investors must look further afield for gains, as larger public markets show their age. Wealthy investors are pouring hundreds of billions of dollars into private and illiquid assets after a 16-year bull market in stocks that has taken valuations to the highest since the dot-com bubble.
Momentum behind digital-asset adoption is building. A Bloomberg analysis of regulatory filings shows that over the past year, the number of institutional investors — ranging from family offices and endowments to hedge funds and pensions — engaged in IBIT has doubled.
As for American Century’s Weiss, he’s still on the sidelines for now, deterred by Bitcoin’s notorious volatility and lack of intuitive valuation methods.
“You have to have a risk tolerance level in the short term like Superman to be able to hold onto that thing,” he said. “To me, it still comes off like something you’d want to put in your gambling portfolio, not necessarily your retirement money.”
Yet while still heresy to many, this week it held up. And in a market built on belief, that behavior may be enough to earn legitimacy.
—With assistance from Matt Mancuso and Denise Cochran.
