Indicator Points to Continued Bitcoin and Nasdaq Gains, but for How Long?

Credit Spread Retreat Fuels Market Optimism, But Risks Loom

A crucial indicator of economic sentiment and corporate credit risk has retreated from recent multi-month highs, offering temporary relief to risk assets like stocks and cryptocurrencies. However, analysts caution that the optimism may be short-lived.

The ICE/BofA U.S. High Yield Index Option-Adjusted Spread (OAS) serves as a widely watched gauge of credit risk, measuring the additional yield investors require for holding high-yield corporate bonds over safer U.S. Treasury securities. A rising spread often signals increasing fears of corporate defaults or economic instability, prompting investors to scale back exposure to speculative assets such as tech stocks and cryptocurrencies.

The OAS has declined to 3.2%, down from a six-month peak of 3.4% earlier this month. This drop has coincided with a recovery in bitcoin (BTC) and the Nasdaq, reinforcing the link between credit market conditions and broader risk sentiment.

Earlier in March, the spread surged by 100 basis points following concerns that President Donald Trump’s tariff policies could drive the economy toward a recession. During this period, both BTC and the Nasdaq saw notable declines, with bitcoin briefly slipping below $80K.

Caution Ahead?

Despite the recent narrowing of the spread, market experts anticipate renewed widening as the economic consequences of Trump’s tariffs become clearer, according to reports from Mint and Reuters.

“We believe this is just the beginning, and conditions are likely to deteriorate further before improving,” wrote Hans Mikkelsen, managing director of credit strategy at TD Securities, in a recent client note.

Technical analysis also suggests that the decline may be temporary. The spread has recently broken above a three-year descending trendline, signaling a potential shift that could lead to further stress in risk markets.