Decoding the Intricate Relation: Bitcoin Halvings and U.S. Treasury Yields
Summary:
The article discusses the correlation between Bitcoin's value and U.S. Treasury yieldings, highlighting the complexities of linking Bitcoin's halvings with 'relative local lows' in Treasury yields. The text underscores the need for a more intricate understanding of the cryptocurrency market, recognizing various influencers on Bitcoin's price rather than solely relying on simplified correlations or solitary data points.
The interrelation between Bitcoin's value and U.S. Treasury yieldings has been acknowledged as a significant gauge based on historical evidence and underlying logic. Fundamentally, when investors seek safety in government bonds, risk-prone assets like Bitcoin typically underperform.
An intriguing graph by TXMC on the social platform X (previously known as Twitter), offers the premise that Bitcoin halving events have coincided with "relative local lows" in the 10-year Treasury yield. Though the term "relative" is not entirely clear cut, it may not necessarily indicate a three-month low. Nevertheless, it provides a worthwhile avenue for exploring macroeconomic trends concurrent with previous halvings.
It is crucial to stress that the chart creator does not imply a direct causative link between Treasury yields and Bitcoin price. TXMC posits that over 92% of Bitcoin's supply is already in circulation. This implies that daily distribution is unlikely to significantly impact Bitcoin's market value.
Despite our innate tendency to identify correlations and patterns, deciphering the significance of the 10-year yield chart in relation to Bitcoin is complex. It's tempting to dismiss the value of the correlation mentioned in the narrative, particularly when considering Bitcoin's performance after its first halving event. However, there are intriguing aspects to consider, such as the circumstances surrounding Bitcoin's third halving in May 2020 with regards to the "relative" low of yields.
Questioning an apparent coupling between Bitcoin's soaring value to a certain event with an indeterminate termination date lacks empirical validity. Even if one accepts the concept of "relative" lows on the 10-year yield chart, we lack convincing proof that Bitcoin's halving date directly affects subsequent price trends.
Each Bitcoin surge is unique, independent of the halving. A case in point would be the impressive 247% value increase between October 2020 and January 2021 which occurred five months post-halving. Notable events surrounding this period include significant outperformance of Russell 2000 Small-Capitalization index over S&P 500 companies.
The allure of higher-risk profiles for investors is suggested by these data, hinting at a shift towards riskier assets, rather than Treasury yield trends from four months prior.
In summary, it can be deceptive when extended timelines are charted. Citing Bitcoin’s rally as a result of a single event is statistically unsound when the uptrend usually happens three or four months after such an event. Thus, there’s a pressing need for a more intricate understanding of the crypto market, recognizing multiple influencers on Bitcoin's price mechanics rather than solely depending on simplified correlations or solitary data.
Published At
9/26/2023 5:20:00 PM
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