The intricate relationship between Bitcoin’s price and U.S. Treasury yields has long been discussed among cryptocurrency enthusiasts. Historical data shows some correlation, but what are the underlying reasons and is there any actual merit to these perceived patterns? Many ponder whether Bitcoin halvings truly ignite BTC rallies, or if it’s the action in the US Treasurys that fuel these price increases.
A thought-provoking chart shared by a user on a popular social network (formerly known as Twitter) argues that Bitcoin halvings have paralleled “relative local lows” in the 10-year Treasury yield. This finding, however, shouldn’t be taken as a definitive causal link between yields and BTC price, especially considering that over 92% of Bitcoin’s supply has already entered the market, making daily issuance less likely to be the factor driving the cryptocurrency’s price.
When revisiting Bitcoin’s first halving, we note that the 10-year yield steadily rose for four months leading up to it. Thus, designating that instance as a pivotal moment for the metric could prove tricky. Despite this, yields did descend below 1.60% leading up to the November 28, 2012 date – a level unseen in the previous three months. This could potentially suggest that, following the first Bitcoin halving, investors reversed the trend and sold off Treasurys, thus pushing yields higher.
However, the third Bitcoin halving in May 2020 presents the most fascinating observation. Around this time, yields plummeted below 0.8% for over four months. Yet, comparing this event to the second halving in July 2016, which followed by a mere 10% gain over four months, it seems challenging to link these past Bitcoin bull runs to a specific, yet undefined, end date considering that statistical evidence lacks support to these claims.
In contrast, Bitcoin experienced a substantial 247% increase in its value between October 5, 2020, and January 5, 2021 – five months after the halving. This time-period coincides with the Russell 2000 Small-Capitalization index remarkably outperforming S&P 500 companies by a 14.5% margin, indicating investors were seeking higher-risk profiles. This creates an argument that perhaps what drove this Bitcoin rally wasn’t any trend in Treasury yields, but a wider shift towards riskier assets.
For this reason, it’s crucial not to get too intertwined with simplistic correlations or isolated data points. Understanding the dynamics driving Bitcoin’s price requires a more nuanced approach, considering the complex factors at play during actual Bitcoin price rallies. Consequently, charts examining extended time periods can prove misleading when it comes to linking Bitcoin’s rally to a single event.
Source: Cointelegraph
