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In the past, the link between traditional equities, commodities, and Bitcoin was crucial. For example, the March 2020 crisis occurred at a time when the stock market was experiencing its worst drop in almost 30 years, and Bitcoin investors were looking for liquidity.
The association, on the other hand, has decreased with time. Unfortunately, it is still indicative of a major trend on the charts. At the time of publication, the realised Bitcoin-Gold correlation has declined considerably, owing to the recent drop in BTC’s price. Since both Gold and the S&P 500 have been trending upwards, the S&P 500 has followed suit.
The link between Bitcoin and the 30-year bond yields in the United States, on the other hand, is the focus of this essay.
Bitcoin v. U.S 30 year bond yields – Uncharacteristic similarity?
The similarities between BTC’s movement and US 30-year bond yields are uncanny, unlike most other connections. Although it is not a like-for-like trend, both assets have moved in the same direction during the last few months.
What is the significance of 30-year bond yields in the United States? Because they’re great indicators for predicting future market circumstances. There are a number of factors at play here, but we’ll focus on how the Fed is involved.
Over the last year, the Federal Reserve has printed the US dollar without maintaining a strong hard cap. Now, following last month’s Fed meeting, the agency has hinted at hiking rates in the near future. Furthermore, while the Fed provided a small amount of interest to banks in the form of cash, it raised the 1-year bond yields in the short term. What happened to the 30-year bonds, though?
It nosedived on the charts.
Ergo, the inference that can be drawn is that inflation is definitely expected going forward, and in light of the fact that the Fed will need to raise interest rates, it will only slow down present-day economic growth.
So, where does BTC land in between all this?
Back to the fact that the current market environment is reflected in dropping 30-year bond yields. The anticipation is that the economy will increase in tandem with the rise in 30-year yields.
The rationale for Bitcoin now stems from the reality that only a growing economy would be beneficial to its cause, as Bitcoin performs better when the overall market is growing.
As a result, as 30-year bond rates begin to recover, a reflexive positive feedback loop could provide a stronger prognosis for Bitcoin, with rising prices implying greater confidence in the asset.