The relationship between Bitcoin’s price and U.S. Treasury yields has been a topic of interest for many investors and analysts. The idea behind this correlation is that when investors seek safety in government-issued bonds, assets like Bitcoin, which are considered riskier, tend to underperform. However, it is important to note that this correlation should not be seen as a direct causal link between yields and Bitcoin’s price.
Recently, an interesting chart shared by TXMC on Twitter suggested that Bitcoin halvings have coincided with “relative local lows” in the 10-year Treasury yield. While the term “relative” is up for debate, it is worth examining the macroeconomic trends surrounding past halvings.
It is noteworthy that over 92% of Bitcoin’s supply has already been issued, indicating that daily issuance is unlikely to be the sole factor propping up the asset’s price. This challenges the prevailing narrative about supply shocks driving Bitcoin’s price.
However, it is crucial to recognize that human perception is naturally inclined to spot correlations and trends, whether real or imaginary. For example, during Bitcoin’s first halving, the 10-year yield had been rising steadily for four months, making it difficult to label that date as a pivotal moment for the metric.
The most intriguing aspect emerges around Bitcoin’s third halving in May 2020. The 10-year yield hit its lowest point approximately 45 days before the event and remained at that level for more than four months. However, Bitcoin’s price only gained 20% in the ensuing four months, suggesting that the halving date did not directly impact its price.
Therefore, even if one concedes the idea of “relative” local lows on the 10-year yield chart, there is no compelling evidence that Bitcoin’s halving date directly impacted its price, at least in the subsequent four months.
It is important to note that no Bitcoin rally is the same, regardless of the halving. From October 2020 to January 2021, Bitcoin saw a significant increase in its value. During that time, the Russell 2000 Small-Capitalization index outperformed S&P 500 companies, indicating a preference for higher-risk profiles. This suggests that Bitcoin’s rally was driven by a momentum toward riskier assets, rather than any trends in Treasury yields.
In conclusion, it is crucial to have a nuanced understanding of the cryptocurrency market. Relying solely on simplistic correlations or isolated data points can be misleading when analyzing extended time periods. Bitcoin’s price dynamics are influenced by a multitude of factors, and it is important to consider the broader macroeconomic trends rather than relying solely on the relationship between Bitcoin’s price and Treasury yields.
