The relationship between Bitcoin’s price and U.S. Treasury yields has been a topic of interest among investors and analysts. Many have considered this correlation to be a valuable indicator, backed by historical data and logical reasoning.
When investors seek safety and stability, they often turn to government-issued bonds. This usually leads to a decrease in the performance of risk-on assets such as Bitcoin. A chart shared by TXMC on social media platform X (formerly known as Twitter) suggests that Bitcoin halvings have coincided with “relative local lows” in the 10-year Treasury yield. Although the term “relative” is somewhat imprecise, as it does not exactly match a three-month low, it is still worth examining the macroeconomic trends surrounding past halvings.
It is important to note that the correlation between Bitcoin’s price and Treasury yields should not be interpreted as a direct causal link. TMXC argues that over 92% of Bitcoin’s supply has already been issued, indicating that daily issuance is unlikely to be the primary factor driving the asset’s price.
It is crucial to acknowledge that human perception is naturally inclined to identify correlations and trends, whether real or imagined. For example, during Bitcoin’s first halving, the 10-year yield had been consistently rising for four months, making it challenging to define that date as a pivotal moment for the metric. However, leading up to November 28, 2012, yields dipped below 1.60%, a level not seen in the previous three months. Subsequently, after the first Bitcoin halving, investors chose to reverse the trend by selling off Treasurys, resulting in higher yields.
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The most intriguing aspect arises when examining Bitcoin’s third halving in May 2020 in relation to the “relative” bottom of yields. Yields dropped below 0.8% approximately 45 days before the event and remained at that level for over four months. It is difficult to argue that the 10-year yield reached its lowest point near the third halving, especially when Bitcoin’s price only increased by 20% in the following four months. By comparison, the second halving in July 2016 was followed by a mere 10% gain over four months. Therefore, attempting to attribute Bitcoin’s bull run to a specific event with an undefined end date lacks statistical merit.
These findings raise interesting questions about the macroeconomic factors at play during Bitcoin price rallies. Between October 5, 2020, and January 5, 2021, Bitcoin experienced a remarkable 247% increase in value. This rally occurred five months after the halving, leading to an examination of notable events during that time. The Russell 2000 Small-Capitalization index outperformed S&P 500 companies by a significant margin, suggesting that investors were seeking higher-risk profiles. This movement seemed to be associated with a momentum towards riskier assets rather than any trends in Treasury yields four months prior.
In conclusion, relying on charts to analyze extended time periods can be misleading. Linking Bitcoin’s rally to a single event lacks statistical rigor, particularly when the upswing typically begins three or four months after the event. It is essential to develop a more nuanced understanding of the cryptocurrency market, one that recognizes the multifaceted factors influencing Bitcoin’s price dynamics rather than relying solely on simplistic correlations or isolated data points.
Please note that this article is for general information purposes only and should not be considered legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.
