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This Indicator Supports Bullish Case in Bitcoin and Nasdaq, for Now
The relief could be short-lived per some observers.
Updated Mar 21, 2025, 8:36 p.m. Published Mar 21, 2025, 12:10 p.m. 2 min read
What to know:
- The ICE/BofA U.S. High Yield Index Option-Adjusted Spread (OAS), a key indicator of economic sentiment and corporate credit health, has receded from recent highs, supporting renewed risk-taking in crypto and equity markets,
- The OAS, which measures the yield difference between high-yield corporate bonds and U.S. Treasury securities, has dropped to 3.2% from a six-month high of 3.4%.
- However, analysts predict the OAS spread may widen in the coming weeks as the negative impact of Trump's tariffs becomes evident.
A key gauge of economic sentiment and corporate credit health has receded from its recent multi-month highs in a positive development for risk-taking in stocks and crypto markets. The relief, however, could be short-lived, per some observers.
The indicator in consideration is the ICE/BofA U.S. High Yield Index Option-Adjusted Spread (OAS), which measures the average yield difference (spread) between U.S. dollar-denominated high-yield corporate bonds and U.S. Treasury securities, adjusted for embedded optionality in the bonds.
It's widely tracked as a credit risk barometer, with the widening spread representing growing investor concern about corporate defaults or economic weakness, often leading to investors lightening their exposure to riskier assets such as technology stocks and cryptocurrencies.
The OAS, representing the premium investors demand for holding high-yielding bonds over the relatively safer Treasury notes, has dropped to 3.2% from the six-month high of 3.4% early this month.
The decline in the spread supports a renewed upswing in bitcoin and Nasdaq.
The spread surged by 100 basis points in four weeks to mid-March as President Donald Trump's tariffs raised the recession spectre. During that time, both BTC and Nasdaq took a beating, with the cryptocurrency falling to lows under $80K.
Temporary relief?
Analysts expect the OAS spread to widen further in the coming weeks as the negative impact of Trump's tariffs becomes clear, according to Mint and Reuters.
"We think this is just getting started and will get worse before it gets better," Hans Mikkelsen, managing director of credit strategy at TD Securities, said in a recent client note.
Applying technical analysis principles to the OAS chart suggests the same.
The spread has moved past the three-year descending trendline, warranting high alert from risk asset investors.
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CNBC reported Tuesday that Musk is discussing a merger between Tesla and SpaceX that would tie his tech empire closer together and instantly create the world’s fifth-largest corporate bitcoin treasury, worth $3.3 billion.
What to know:
- Elon Musk is exploring a potential merger of Tesla and SpaceX, a move that would deepen operational overlap in areas such as power infrastructure and AI-related computing.
- A combined Tesla-SpaceX entity would control about 30,221 bitcoin, worth roughly $3.3 billion, making it the fifth-largest public corporate holder of the cryptocurrency.
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