The correlation between Bitcoin’s price and U.S. Treasury yields has long been considered significant due to historical data and the underlying rationale. When investors seek safety in government-issued bonds, riskier assets like Bitcoin tend to perform poorly. A recent chart shared by TXMC on Twitter argues that Bitcoin halvings have coincided with “relative local lows” in the 10-year Treasury yield, suggesting a connection between the two. However, it’s important to note that this correlation does not imply a direct causal link between yields and Bitcoin’s price.
TMXC also points out that over 92% of Bitcoin’s supply has already been issued, indicating that daily issuance is unlikely to be the factor propping up the asset’s price. Nonetheless, human perception is naturally inclined to spot correlations and trends, whether they are real or imaginary. In the case of Bitcoin’s first halving, the 10-year yield had been steadily rising for four months, challenging the idea that it was a pivotal moment for the metric.
However, the third halving in May 2020 presents a more intriguing scenario. Yields plunged below 0.8% approximately 45 days before the event and remained at that level for more than four months. Yet, the 10-year yield hitting its lowest point near the third halving does not align with Bitcoin’s price performance, as it only gained 20% in the ensuing four months. This raises doubts about attributing Bitcoin’s bull run to a specific event with an undefined end date.
It’s worth noting that no Bitcoin rally is the same, regardless of the halving. Between October 2020 and January 2021, Bitcoin experienced a significant 247% increase in value. During that time, the Russell 2000 Small-Capitalization index outperformed S&P 500 companies by a notable margin. This suggests that investors were seeking higher-risk profiles, driven by a momentum towards riskier assets rather than trends in Treasury yields.
In conclusion, relying solely on simplistic correlations or isolated data points can be misleading when analyzing extended time periods. The connection between Bitcoin’s rally and a singular event lacks statistical rigor, as the upswing generally initiates three or four months after the event. To understand the cryptocurrency market better, it is essential to consider the multifaceted factors that influence Bitcoin’s price dynamics, rather than relying solely on correlations or isolated data points.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
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