Bitcoin USD Faces $298B Pressure from China’s Treasury Guidance

Key Insights:

• Bitcoin USD faces tighter conditions after Chinese regulators instructed banks to limit US Treasury purchases, citing concentration risk and volatility.
• The move could raise the term premium and push yields higher, with research estimating that foreign official sales can sharply spike 10-year yields within a month.
• Treasury prices slipped, and the dollar weakened on the news, while Chinese banks held approximately $298 billion in dollar-denominated bonds as of September.

Chinese regulators advised financial institutions to curb holdings of US Treasuries, urging banks to limit purchases and asking those with high exposure to pare positions, as Bloomberg News reported.

The guidance was communicated verbally in recent weeks and does not apply to China’s state holdings of US Treasuries. This also appears to have impacted the price of Bitcoin USD.

Treasury prices slipped on the news, pushing yields higher, while the dollar weakened slightly. Chinese banks held about $298 billion in dollar-denominated bonds as of September, though the share allocated to Treasuries is unclear.

Price of Bitcoin USD Vulnerable to Rates Repricing

The dominant transmission channel from Treasury guidance to Bitcoin USD is tighter financial conditions.

Higher risk-free yields and wider term premium pressure high-beta assets, with Bitcoin particularly sensitive to global liquidity shifts.

A 2025 study titled “Bitcoin Returns and Global Liquidity” reported Bitcoin USD returns were highly sensitive to global liquidity conditions, while a 2023 paper titled “Monetary Policy and Bitcoin” documented reactions around monetary-policy news windows.

The tail risk is term-premium repricing rather than a sudden liquidation event.

Because the reported guidance excludes state holdings and was delivered verbally, the base case is a marginal reduction in demand, with slower buying and shorter duration, rather than cliff-edge selling.

Fed research found foreign holdings are linked to lower term premia, implying reduced foreign demand can raise yields even absent credit concerns.

A 2025 Kansas City Fed bulletin argued liquidation shocks among foreign investors could raise Treasury yields by roughly 25 to 100 basis points.

Flow Detection Timeline for Bitcoin USD Impact

If banks pull back, the earliest “flow tells” will appear in auction metrics and indirect awards within days. This has also sparked discussions over its potential impact on the price of Bitcoin USD.

Treasury’s “Investor Class” foreign-and-international awards are published on a lagged schedule, roughly every two weeks for coupons and monthly for bills.

The Fed’s weekly custody holdings serve as a general gauge of foreign official stress. At the same time, TIC confirmation arrives about six to eight weeks later because the Treasury explicitly publishes TIC with a 1.5-month lag between the release date and the as-of date.

US Treasury TIC data showed total foreign holdings of US Treasuries at $9.355 trillion in November 2025, while China’s reported holdings fell to $682.6 billion, the lowest since September 2008.

China had already been shrinking reported exposure over time, even before this new bank-level guidance.

Why Regulators Framed Move as Risk Management?

Officials framed the move as risk diversification rather than as a response to geopolitics or doubts about US creditworthiness, setting no specific targets or deadlines.

The guidance came ahead of a Xi-Trump call, which situates it amid broader market questioning of the haven status.

As a result, the move can be interpreted as implying that cross-asset volatility and policy uncertainty raise the internal cost of being concentrated in long-duration US paper.

The structure of verbal guidance excluding state holdings suggests optionality.

Regulators can influence bank balance sheets without triggering a public “reserve policy” signal, which matters if the goal is risk diversification rather than a geopolitical message.

The PBOC routinely uses large banks as operational arms for FX and liquidity management.

A regulator-to-bank verbal guidance on portfolio concentration can then be framed as a micro-prudential overlay on a macro environment in which banks are already being managed as balance sheet infrastructure. Besides, it has also fueled speculations in the Bitcoin USD market.

Markets Price Marginal Buyer Shift

The immediate reaction is small but directionally consistent. The report weighed on the dollar and nudged Treasury yields higher, exactly what markets would expect if they treat marginal foreign demand headlines as term-premium relevant.

Meanwhile, it also comes amid a time when the price of Bitcoin (BTC) USD is facing immense pressure.

Reuters reported that total foreign Treasury holdings reached record highs in November 2025 despite China’s decline, implying offsetting private or foreign demand.

If the replacement bid comes at a higher term premium, indicating price-sensitive buyers, yields rise, and conditions tighten. If it comes via captive balance sheets, such as banks needing high-quality liquid assets or pensions duration matching, the yield impact can be smaller.

Chinese regulators delivered guidance to major banks to limit new purchases of US Treasuries and reduce large existing positions, citing concentration risk and market volatility.

The move does not apply to China’s official state holdings and sets no specific targets or deadlines.

Treasury prices slipped, pushing yields higher, while Bitcoin faces headwinds from tighter financial conditions if the guidance translates into measurable portfolio shifts.

China’s verbal guidance to banks on cutting US Treasury exposure may lift yields and tighten liquidity, creating headwinds for Bitcoin USD and the broader crypto market.