Traditional U.S. assets are going haywire as U.S.-China trade tensions continue to rattle global markets, now coupled with fresh data of tumbling sentiment towards the U.S. economy and mounting inflation concerns.

The most recent University of Michigan survey, published on Friday, found that consumer sentiment fell to 50.8 from 57.0, nearing the most depressed level in three years and far below that seen during the 2020 Covid shutdowns. Year-ahead inflation expectations surged to 6.7%, up from 5% in the prior month and the highest read since 1981.

On the back of the data, investors resumed selling long-term U.S. government bonds and the greenbacks, two assets traditionally considered as safe havens. The 10-year Treasury yield soared above 4.55% during U.S. morning hours, up more than 50 basis points in just a week. Meanwhile the dollar index (DXY) sank below 100 to a three-year low. Gold, meanwhile, hit a fresh record of $3,240 per ounce.

After a wildly volatile past few sessions, U.S. stocks were trading in a far tighter range on both sides of unchanged on Friday. At press time, the Nasdaq was higher by 0.6%

Meanwhile, cryptocurrency markets were moving higher, with bitcoin (BTC) holding just above $82,000, gaining 4% over the past 24 hours. The broad-market CoinDesk 20 Index was up 3%, with altcoin majors Solana’s SOL, Avalanche’s AVAX leading with 6% gains.

Signal or noise?

While some macroeconomic analysts are fearful that the recent surge in government bond yields is threatening the future outlook of the U.S. economy, others believe investors are reading too much into short-term market swings.

«U.S. dollars and U.S. government debt, two of the market’s most liquid safe haven categories, are going haywire,» Noelle Achison, analyst and author of the Crypto is Macro Now newsletter, said in a Friday note. «This is not the case for other safe havens, however, just those directly tied to the U.S.»

“I believe that it is much more likely that recent sharp moves in these asset classes is due to highly leveraged market participants being forced out of positions than due to fundamentals,” said billionaire investor Bill Ackmann in a post on X.

“Technical factors are driving the dramatic market moves,» Ackman continued. «As a result, markets have become increasingly unreliable as short-term indicators of the impact of policy changes.»

When the U.S. government sanctioned the Ethereum-based crypto mixing service Tornado Cash in 2022, it ignited a debate within the crypto community that continues three years later.

Tornado enabled users to transfer crypto anonymously. The government contended that the service facilitated money laundering, prompting some of Ethereum’s validators and block builders to take steps to avoid engaging with Tornado-linked transactions, which made the service slower and costlier to use.

Advocates argued that complying with the sanctions amounted to censorship — undermining a fundamental cypherpunk principle. President Donald Trump supported the cypherpunks and lifted the sanctions on Tornado Cash in March of this year, but for some Ethereum developers, the situation highlighted a flaw within the network that still exists today: Why should users depend on third-party apps to transact privately on the network?

«Publicly accessible transaction graphs allow anyone to trace the flow of funds between accounts, and balances are visible to all participants in the network, undermining financial privacy,» crypto security researcher Pascal Caversaccio explained in a blog post on Wednesday. «While the Ethereum network’s transparency fosters trustlessness, it also opens the door to potential surveillance, targeting, and exploitation.»

Perhaps emboldened by the recent Tornado Cash developments, Ethereum developers and researchers have once again begun discussing ideas for making the Ethereum network private at its core.

«Privacy must not be an optional feature that users must consciously enable — it must be the default state of the network,» said Caversaccio, whose post outlined his vision for a privacy-oriented Ethereum roadmap. «Ethereum’s architecture must be designed to ensure that users are private by default, not by exception.»

Caversaccio’s post identified several potential interventions — some new, some old — that could, according to him, would make Ethereum more private for end-users. One idea is to encrypt Ethereum’s public mempool — where transactions are sent before they’re recorded permanently. Another involves making Ethereum transactions confidential through zero-knowledge cryptography, new transaction formats, and other methods.

«Today, Ethereum operates in a partial, opt-in privacy model, where users must take deliberate steps to conceal their financial activities — often at the cost of usability, accessibility, and even effectiveness,» wrote Caversaccio. «This paradigm must shift. Privacy-preserving technologies should be deeply integrated at the protocol level, allowing transactions, smart contracts, and network interactions to be inherently confidential.»

In response to Caversaccio’s post, Ethereum co-founder Vitalik Buterin left a comment on the network’s main developer forum with his own much shorter privacy-oriented Ethereum roadmap.

Buterin suggested focusing on privacy for on-chain payments, anonymizing on-chain activity within applications, making communication on the network anonymous, and privatizing on-chain reads.

To achieve all of this, Buterin listed various steps like integrating certain third-party privacy features into the core network.

One of the more substantial interventions suggested by Buterin involves moving the network towards a “one address per application” model — a departure from today’s system, where a single application may employ dozens of wallets for different features. “This is a major step, and it entails significant convenience sacrifices, but IMO this is a bullet that we should bite, because this is the most practical way to remove public links between all of your activity across different applications,” Buterin wrote.

According to Buterin, if all of his suggestions are implemented, private transactions could be the default on Ethereum.

The privacy discussion comes a few weeks before Ethereum’s next major upgrade, Pectra, which doesn’t have a major focus on privacy. Ethereum developers are also currently planning the network’s following upgrade to Fusaka. The changes to be included in that hard fork are not yet set in stone.

Read more: Vitalik Buterin Disappointed With Embrace of Blockchain “Casinos”

The complex pipes that keep derivatives trades moving are about to get a major efficiency boost in DeFi, according to Crypto Valley Exchange.

Crypto Valley Exchange’s «smart clearing» protocol will lower the capital requirements for derivatives traders by setting collateral levels in light of the traded assets’ correlations in price. In doing so, it could make DeFi more competitive with the mainstream financial markets crypto trying to replace, according to CEO James Davies.

The service is a new take on an age-old problem in DeFi: how to sufficiently mitigate counterparty risk in a trustless environment.

Traditional financial markets like CME and NYMEX rely on clearinghouses to be a trusted counterparty for every buyer and seller. They demand some collateral, but hardly 100%. DeFi markets, meanwhile, definitely lack a trusted middleman, and so can’t afford to require anything less than full collateral.

This system works, but hardly well. More collateral requirements means traders have less capital to deploy elsewhere. Davies claims this severely limits the market’s growth.

«This is the one place where all of crypto is much more conservative than TradFi,» Davies said. «We’re really, really undersized in this space, and that’s because clearing is needed to create this efficiency.»

He pointed to the seeming lunacy of requiring full margin for trades involving highly correlated assets, like forms of oil.

«If I was to go to, say [commodities exchange] NYMEX as an oil company and want to buy oil and sell jet fuel, and you asked me to put down full margin on both parts, I’d laugh at you, because those things are 90% correlated,» Davies said.

He believes the same logic should apply in DeFi. «Ethereum isn’t going to 10,000 on the day Solana goes to zero,» he said. Because of the correlation, a trader betting that ETH will rise relative to SOL shouldn’t need to post full collateral.

In his telling, clearing is the missing piece in DeFi’s effort to gobble up traditional finance. If protocols gain an ability to better manage the risk, and also do so transparently, on a blockchain, so that everyone can see what’s happening and how, then they’ll become competitive with the financial rails they’re trying to replace.

«You can’t just build a perps DeFi platform for, say, treasuries or commodities, go up against NYMEX or go up against CME, and expect to win when you have to lock up so much more collateral than you would do to trade on those platforms.» Davies said.

If crypto’s real-world asset (RWA) subsector delivers on its promise of bringing tokenized versions of everything on-chain then, according to Davies, DeFi will need a solution to the clearing efficiency problem such as this. Institutional investors won’t put up with requirements for triple the collateral capital they’re used to – especially on correlated trades, he said.

The first user is Crypto Valley Exchange itself. Already, the Arbitrum-based futures and options DEX is running dated futures orders through its smart clearing. More capabilities are coming later this year to support commodities markets beyond crypto, and Davies hopes for other protocols to plug into smart clearing, too.