US stock markets on the verge of a correction as Bitcoin brushes $112,000

The cracks in the US stock market got wider on Thursday as bond yields surged and Wall Street tried to act like nothing was wrong. Stocks edged up, but the numbers were weak and shaky.

The Dow Jones added just 156 points. The S&P 500 crawled up by 0.3%, and the Nasdaq squeezed out a 0.7% gain. That came as the 30-year Treasury yield hit 5.14%, the highest it’s been since October 2023, right after lawmakers pushed through a new bill that traders say could make the deficit spiral out of control.

That bill, passed in the House early Thursday along party lines, would cut taxes and increase military spending. It’s now on its way to the Senate. The Congressional Budget Office says the total cost could hit $4 trillion, which would blow a hole in the already massive national debt.

At the same time, fears of inflation are rising again, partly because of President Trump’s universal tariffs, which are already weighing on bonds and lifting yields even higher.

Traders face rising yields, budget blowouts

Longer-term yields are climbing fast. The 10-year Treasury also rose during the session but came down a bit later. Still, yields are moving in the wrong direction for borrowers. These are the same rates that shape mortgages, credit card interest, and all kinds of consumer debt. That’s putting pressure on an economy already hit by Trump’s trade moves.

Jed Ellerbroek, who manages portfolios at Argent Capital Management, told CNBC, “Short term, the tax bill is good for the economy. It is going to boost GDP growth in 2026.

It reduces taxes for lots of people, it increases spending, especially on defense, and so those things are stimulative to the economy.” But Jed didn’t sound optimistic beyond that.

“Longer term, yeah, it blows out the deficit. Yields are going higher, which means prices are going down because Treasuries are becoming incrementally less appealing and trustworthy.”

The Treasury auction on Wednesday was already a mess. Demand for 20-year bonds dropped hard, which pushed yields even higher and sent stocks into reverse. That selloff hasn’t disappeared, and investors say it could get worse if the Senate passes the same bill.

Chris Senyek, chief strategist at Wolfe Research, said in a note Thursday, “Not shockingly, the long-term US fiscal situations is on an unsustainable path with spending levels YTD surprising to the upside again, with only 2020/2021 trends likely to be worse when the US reaches its September fiscal year-end.”

He added, “Our sense is bond vigilantes are likely to start ‘pushing back’ on this unsustainable long-term outlook encapsulated in the tax bill working its way through Congress by sending long-term yields higher.”

Chris also pointed out that the US is facing a massive pile of debt that will mature in the next 12 months. Combined with unclear inflation risks and uncertainty about how quickly the Federal Reserve can cut rates, there’s plenty of room for more volatility this year.

Bitcoin climbs past $112K while investors ditch bonds

While stocks and bonds fumbled, Bitcoin surged again. On Thursday, it jumped above $111,000, climbing as high as $111,989.31 before holding steady near $111,578.76 by afternoon. The increase was about 3% on the day. That pushes the total gain for 2025 to over 18% so far.

This rally has been a slow grind—way different from the wild runs of the past. It’s being powered by large players. Big firms are buying. Companies are holding more of it. Bitcoin is being treated more like a safe haven than a gamble. One of the big reasons? Moody’s slapped the US with a fresh debt downgrade, which made a lot of investors run straight to crypto.

Bitcoin’s typical link with tech stocks is also starting to fade. It used to move in sync with the Nasdaq, but now it’s heading in its own direction. Some traders say that’s because more people are seeing it as a backup plan for when the dollar becomes unreliable.

New numbers show the trend isn’t just talk. Bitcoin ETFs have barely seen any outflows this month, with only two days of outflows in all of May. Data from SoSoValue shows the rest has been non-stop inflows.

And it’s not just funds. Public companies are buying bitcoin like crazy. Their holdings are up 31% this year to about $349 billion, making up 15% of all bitcoin in circulation, based on data from Bitcoin Treasuries.

Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More