Bitcoin has shown a strong correlation with the 10-year US Treasury bond, and analysts suggest rising debt could trigger a major price move.
The correlation dates back to Bitcoin’s early days, with a rise in US 10-year bond yields (US10Y) aligning with a notable price move in the asset. As debt security yields have started to tick up again, optimism of a consequent Bitcoin ($BTC) increase is making the rounds.
Key Points
- Bitcoin has shown a strong correlation with the 10-year US Treasury bond.
- The largest $BTC moves have historically correlated with rising US 10-year bond yields.
- The alignment of the rising US debt yields with the business cycle expansion has played a major role.
- A new phase started in March and could take Bitcoin to much higher prices, as in previous instances.
US Debt Yields’ Growth Marks Bitcoin Rise, Not Top
Specifically, market veteran Sykodelic shared this analysis, highlighting the relationship as often misunderstood. Typically, rising long-term bond yields suggest that the US government is paying investors a higher interest rate to borrow money. This often drives inflation and reduces appetite for exposure to risk assets.
However, the analysis shows why this is not the case for Bitcoin. In fact, the market watcher stated that the largest $BTC moves have historically correlated with rising US 10-year bond yields. As such, it enables an expansion phase and not the asset’s top, as some analysts claim.
One factor that Sykodelic mentioned as an enabler for the Bitcoin rally is the alignment of the rising US debt yields with the business cycle expansion. For the uninitiated, the expansion phase of the business cycle is marked by growth in production, GDP, and employment, which encourages investment.
This phase is conducive to risk assets like Bitcoin, often catalyzing a strong price increase. If they continue to align with the US 10-year Treasury bond yields, the crypto asset could be entering another expansion phase.
Historical Price Correlation
An accompanying chart further shows how Bitcoin has grown alongside the US government’s 10-year bond yields. The first instance was in January 2013, when yields grew from 1.75% to 3.04% in January 2014. During this window, $BTC surged from $13.50 to $1,240 before a considerable retracement.
From November 2016 to November 2018, the US10Y increased from 1.82% to 3.25%. Again, Bitcoin exploded 2,740% from $697 to $19,800. Meanwhile, the last occurrence was from July 2020 to October 2023, during which the long-term debt yields rose from 0.65% to 5.02%. $BTC rallied from $9,135 to trade at $35,194, having peaked at $69,000 in November 2021.
Sykodelic believes a new phase started in March and could take Bitcoin to much higher prices, as in previous instances. So far, the US10Y has risen from 3.93% to 4.65%, and $BTC by over 11%. If history is anything to go by, this could be just the start of a massive price move for the premier asset.
In the meantime, $BTC trades at $77,240, dropping 4.7% in the past seven days. The asset failed to break past $82,000 in the previous week amid inflation concerns and renewed geopolitical tension. Nonetheless, long-term holders have accumulated at a staggering rate, with their market share reaching levels not seen before.
