When the biggest and “safest” investments in the world start to get questioned, it’s necessary to take a hard look at what the idea of “safety” actually means.

On that note, if major foreign holders in the European Union reduce their exposure to U.S. Treasuries as a result of the Trump administration’s constant barrage of controversial actions at home and abroad, Bitcoin (BTC 1.11%) could well end up in the conversation as an alternative store of value. But the coin’s recent track record suggests a far less flattering first reaction is also probable, so let’s examine what’s most likely to happen if a real Treasury sell-off ends up playing out.

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Treasury selling is a liquidity event first

Before we get into Bitcoin specifically, we’ll first need to set the stage. U.S. Treasuries are the bonds issued by the U.S. government, and they anchor pricing across global finance. The Treasury market is among the largest in the world, with nearly $30 trillion in marketable debt outstanding, and policymakers, as well as central bankers, watch its liquidity closely because disruptions can and do ripple into other markets.

Foreign investors hold about $9.4 trillion of U.S. Treasury securities in total. That puts foreign holdings at roughly 31% of that marketable stock.

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If foreign selling ever accelerates due to irritation with the U.S., or a lack of confidence in its economy or its leadership, all of which are risks that are currently in play, the near-term impact is usually that the stock and crypto markets pivot to being risk-off, meaning that investors pull capital from higher-risk assets and reallocate their capital to safer ones as quickly as they are able. So let’s take a look at what that would do to Bitcoin.

Bitcoin could rise later, but fall first

If there’s a genuine Treasury sell-off, the bullish scenario is that some investors will want an asset outside any one country’s control, and Bitcoin becomes a beneficiary of that preference. In theory, that would channel capital away from fiat currencies like the dollar. The channeling process could take quite a while, though.

The bearish scenario is far worse. Bitcoin’s correlation with the U.S. stock market can and does spike sharply from time to time, especially in times of crisis. Thus, the most likely immediate outcome of a true U.S. Treasury sell-off is that Bitcoin would drop sharply, and take a long period to recover.

Over an even longer horizon, perhaps on the order of a couple of years, Bitcoin could still benefit massively if global diversification away from the U.S. dollar continues. So in closing, take this risk seriously. If it happens, it won’t be pretty, but those who buy the blood, as I plan to do, will probably be better off for it eventually.