Bitcoin and Treasury Yields: Understanding Their Complex Relationship

Understanding the Bitcoin Treasures

Let’s face it, Bitcoin and U.S. Treasury yields are like two friends at a party who nod at each other but mostly ignore one another. When the world of investments gets shaky, many turn to the safe haven of government bonds. Meanwhile, our buddy Bitcoin tends to sulk in a corner, asking, “Why don’t you love me?”

Bitcoin Halvings vs. Treasury Yield Trends

For the uninitiated, Bitcoin goes through a “halving” every four years, which basically means the rewards for mining new coins are cut in half. Now, here’s where things get unintentionally comedic: past halvings coincided with the U.S. 10-year Treasury yields hitting their local lows. It seems ironic that something created as a counter-speculative asset keeps mirroring the government-sanctioned money market.

Bitcoin’s first halving in 2012: Treasury yields were bopping around the 1.60% range.
Second one in 2016: Yields continued to play a game of musical chairs.
By the third in 2020, yields plummeted below 0.8%, leaving Bitcoin scratching its digital head.

Correlation Isn’t Causation: A Love Story

Now, let’s address the elephant in the room: correlation does not equal causation. Just because your pet cat walks in when you’re about to eat doesn’t mean it’s the reason for your late-night snack sessions. In the same vein, Bitcoin’s price movements post-halvings shouldn’t be blindly linked to Treasury yields. Sure, they’ve been around each other, but that doesn’t mean a trip down the aisle is forthcoming!

Looking Beyond the Halvings

If we dive deeper into Bitcoin’s movements, particularly around the legendary surge from October 2020 to January 2021, it paints a broader picture. During that wild ride, Bitcoin shot up by 247%! That’s like witnessing a moose in ballet shoes. Yet, around the same time, the Russell 2000 index was dancing circles around the S&P 500 with a performance gap of 14.5%.

The Quest for Riskier Assets

Investors clamoring for riskier profiles seemed to play the trump card here. With a median market cap of $1.25 billion, Russell 2000 companies weren’t even close to the S&P 500 giants at $77.2 billion. People wanted action, and Bitcoin just happened to be in the limelight. Tying that performance to the Treasury yields before the halving just doesn’t check out!

The Macro Perspective

Considering the broader macroeconomic trends is essential. Rather than waving the ‘halving’ flag, we should be examining global market behaviors, investors’ preferences for risk, and other external factors driving this cryptocurrency rollercoaster. It’s never just one factor in play. Bitcoin enthusiasts must acknowledge that the market is multifaceted and complex.

The Bottom Line

So, as we dismount from this rollercoaster of correlation and causation, let’s remember that while charts offer fascinating insights, they can also lead us astray. Bitcoin price rallies are influenced by multiple factors, needing more than just a wave from past halvings or Treasury yields to make sense of the tangled web we find ourselves in. Until then, Bitcoin will continue to play coy with yields, and we’ll keep guessing what they really mean for the future.