What if China caps its dollar reserves?
A formal PBOC cap on USD reserves removes the largest price-insensitive UST bid: long-end term premium jumps ~20bp, DXY sinks and gold/BTC catch the reserve-diversification flow. China holds ~$0.75-0.8tn USTs, so the flow channel is real but slow. Forward angle vs. the 2018 'China sells Treasuries' scare (which fizzled): a formal target makes it policy rather than tactical, but Beijing still needs USD assets to manage CNY, capping how fast it can actually exit.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. Beijing formally announces a hard ceiling on USD reserves and a non-dollar target, lifting term premium and pressuring the US long end. The trigger decomposes into signed root‑shocks — Dollar/reserve confidence ▼ · Real yields ▲ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▲ +5.7% hist -0.2–+10.99% |
| 2 | Gold XAUon Hyperliquid 📈 chart | Commodity | ▲ +3.3% model prior · unmeasured |
| 3 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▲ +3.2% model prior · unmeasured |
| 4 | 30y Treasury yield DGS30 📈 chart | Rate | ▲ +20bp hist +1.49–+28.17% |
| 5 | Coinbase COINon Hyperliquid 📈 chart | Equity | ▲ +2.2% model prior · unmeasured |
| 6 | US dollar (DXY) DXYon Hyperliquid 📈 chart | FX | ▼ -2.0% hist -2.65–-0.28% |
| 7 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▲ +1.9% model prior · unmeasured |
| 8 | 10y Treasury yield DGS10 📈 chart | Rate | ▲ +17bp hist +6.22–+19.64% |
| 9 | EUR/USD EURUSDon Hyperliquid 📈 chart | FX | ▲ +1.8% model prior · unmeasured |
| 10 | GBP/USD GBPUSDon Hyperliquid 📈 chart | FX | ▲ +1.4% model prior · unmeasured |
| 11 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▲ +1.3% model prior · unmeasured |
| 12 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▲ +1.3% model prior · unmeasured |
| 13 | Tech sector XLK 📈 chart | Equity | ▼ -1.0% hist -5.77–+3.84% |
| 14 | Turkish lira TRY 📈 chart | FX | ▲ +1.4% model prior · unmeasured |
Probable recommendation
Why we may diverge from history
Trust the cascade's SHORT on SPX: history's +5/+4% leans on Nixon and Louvre — stale 1970s-80s analogues; a hard PBOC dollar-reserve cap lifts term premium with no precedent in that sample.
Historical precedent — what analogous events actually did
Across 13 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| AMD AMD | SHORT | -14.5% · 5d -7.4% | 100% | 6 | 0.86 | ✓ matches cascade |
| USDJPY USDJPY | LONG | +3.9% · 5d -1.4% ↺ fades | 100% | 2 | 0.75 | ⚠ differs |
| MU MU | SHORT | -19.5% · 5d -7.8% | 83% | 6 | 0.58 | ✓ matches cascade |
| XOM XOM | LONG | +1.7% · 5d -0.1% ↺ fades | 73% | 11 | 0.38 | ✓ matches cascade |
| SPX SPX | LONG | +0.8% · 5d -0.5% ↺ fades | 73% | 11 | 0.35 | ⚠ differs |
| 30y yield DGS30 | LONG | +12bp · 5d +6bp | 62% | 8 | 0.22 | ✓ matches cascade |
| US dollar DXY | SHORT | -1.0% · 5d -0.6% | 55% | 11 | 0.08 | ✓ matches cascade |
| MSTR MSTR | SHORT | -4.4% · 5d -0.1% | 50% | 2 | 0.00 | ⚠ differs |
| 10y yield DGS10 | LONG | +4bp · 5d +3bp | 45% | 11 | 0.00 | ✓ matches cascade |
| XLK XLK | LONG | +4.7% · 5d -0.2% ↺ fades | 50% | 2 | 0.00 | ⚠ differs |
| NDX NDX | LONG | +2.1% · 5d +0.2% | 50% | 4 | 0.00 | ⚠ differs |
| TSM TSM | LONG | +10.1% · 5d +8.1% | 50% | 2 | 0.00 | ⚠ differs |
| ASML ASML | LONG | +19.7% · 5d +9.5% | 50% | 2 | 0.00 | ⚠ differs |
| QCOM QCOM | LONG | +1.5% · 5d +2.1% | 50% | 2 | 0.00 | ⚠ differs |
Why this probability
Formal hard USD-reserve ceiling is novel sovereign signaling China avoids; gradual diversification instead. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.