Cryptocurrency and Stocks Show High Correlation Levels as Macroeconomics Start Driving Markets

September 26, 2024 Bitcoin.com

Bitcoin’s weekend rally fizzles under $64K — Pro traders take neutral positions

August 26, 2024 Coin Telegraph

Bitcoin is holding $60K — Here’s why it’s important

August 22, 2024 Coin Telegraph

Bitcoin price drops its early week gains — Here is why

October 3, 2023 Coin Telegraph

CME

Bitcoin price gave up its recent gains as concerning signals from the US economy continue to weigh on investor sentiment.

Bitcoin (BTC) price gained 6% from Oct. 1 to Oct. 2 but after failing to break the $28,500 resistance, the price dropped by 4.5% on the same day. This decline happened because of the disappointing performance of Ether (ETH) futures exchange-traded funds (ETFs) that were launched on Oct. 2 and concerns about an upcoming economic downturn.

*Bitcoin price index, USD. Source: TradingView*

This correction in Bitcoin's price on Oct. 3 marks 47 days since Bitcoin last closed above $28,000 and has led to the liquidation of $22 million worth of long leverage futures contracts. But before discussing the events affecting Bitcoin and the cryptocurrency market, let's attempt to understand how the traditional finance industry has affected investor confidence.

The overheated US economy could lead to more Fed action

Investors have heightened their expectations of further contractionary measures by the U.S. Federal Reserve following the release of the latest U.S. labor market data on Oct. 3, revealing that there were 9.6 million job openings at the end of August, up from 8.9 million in July.

Fed Chair Jerome Powell had indicated during a speech at the Jackson Hole Economic Symposium in August that "evidence suggesting that tightness in the labor market is no longer easing could necessitate a monetary policy response."

Consequently, traders are now pricing in a 30% chance that the Fed will raise rates at their November meeting, compared to 16% in the previous week, according to the CME's FedWatch tool.

The Ether futures ETFs launch falls short

On Oct. 2, the market welcomed nine new ETF products expressly designed to mirror the performance of futures contracts linked to Ether. However, these products saw trading volumes of under $2 million during the first trading day, as of midday Eastern Time. Senior ETF analyst at Bloomberg, Eric Balchunas, noted that the trading volumes fell short of expectations.

*Ethereum futures-based ETF volumes on Oct. 2, USD. Source: K33 Research / @VetleLunde*

On the debut day, the trading volume for Ether ETFs significantly lagged behind the remarkable $1 billion launch of the ProShares Bitcoin Strategy ETF. It's worth noting that the Bitcoin futures-linked ETF was introduced in October 2021 during a flourishing cryptocurrency market.

This occurrence may have dampened investors' outlook on the potential inflow after an eventual Bitcoin spot ETF. Still, there remains uncertainty surrounding the probability and timing of these approvals by the U.S. Securities and Exchange Commission (SEC).

Regulatory pressure mounts as Binance faces a class-action lawsuit

On Oct. 2, a class-action lawsuit was filed against Binance.US and its CEO Changpeng "CZ" Zhao in the District Court of Northern California. The lawsuit alleges unfair competition aimed at monopolizing the cryptocurrency market by harming its competitor, the now-defunct exchange FTX.

The plaintiffs claim that CZ's statements on social media were false and misleading, particularly since Binance had previously sold its FTT token holdings before the announcement on Nov. 6, 2022. The lawsuit asserts that CZ's intention was to drive down the price of the FTT token.

The criminal case against Sam Bankman-Fried will begin on Oct. 4 in New York. Despite CZ's denial of unfair competition allegations, speculation within the crypto community continues to circulate regarding this matter.

BTC’s correlation to traditional markets seems higher than anticipated

Bitcoin's price decline on Oct. 3 appears to reflect concerns about an impending economic downturn and the potential Federal Reserve's monetary policy response. Furthermore, it demonstrated how closely cryptocurrency markets are tied to macroeconomic factors.

Exaggerated expectations for the cryptocurrency ETFs also signal that the $28,000 level might not be the consensus for investors given the regulatory pressures and legal challenges, such as the class-action lawsuit against Binance, which underscore the ongoing risks in the space.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin price holds steady as S&P 500 plunges to 110-day low

September 27, 2023 Coin Telegraph

Coin Telegraph

The S&P 500 dropped to a 110-day low as the market digests what “higher for longer” means for stocks. Will Bitcoin begin to chart its own path?

On Sept. 20, the Federal Reserve delivered a message that reverberated through financial markets: interest rates are expected to remain at their highest level in over two decades, and possibly for longer than most market participants’ expectations. This attitude comes against the backdrop of stubbornly high inflation, with the core inflation rate hovering at 4.2%, well above the central bank's 2% target, and unemployment at record lows.

As investors grapple with this new reality, a pressing question arises: Will the S&P 500 and Bitcoin (BTC) continue to underperform in the face of a tighter monetary policy?

The impact of the Fed's decision was swift and severe. The S&P 500 plunged to its lowest level in 110 days, signaling growing unease among investors.

*S&P 500 index (blue, right) vs. U.S. 10-year Treasury yield (orange, left)*

Notably, the 10-year Treasury yield surged to levels not seen since October 2007. This movement reflects the market's belief that rates will continue to climb, or, at the very least, that inflation will eventually catch up with the current 4.55% yield. In either case, anxiety is mounting over the Fed's ability to sustain these elevated interest rates without destabilizing the economy.

Bitcoin does not necessarily follow traditional markets

One intriguing development amidst this financial turbulence is the apparent disconnect between the S&P 500 and cryptocurrencies, particularly Bitcoin. Over the past five months, the 30-day correlation between the two assets presented no clear trend.

*30-day rolling correlation: S&P 500 futures vs. Bitcoin/USD. Source: TradingView*

Such divergence suggests that either Bitcoin has anticipated the stock market correction, or external factors are at play. One plausible explanation for this decoupling is the hype surrounding the possible introduction of a spot Bitcoin ETF and regulatory concerns that have hindered the upside potential of cryptocurrencies. Meanwhile, the S&P 500 has benefited from robust 2nd-quarter earnings reports, though it's essential to remember that those numbers reflect the situation from 3 months prior.

As the Fed holds firm on its commitment to high-interest rates, the financial landscape is entering uncharted territory. While some may interpret the central bank's stance as necessary to combat inflationary pressures, others worry that keeping rates elevated could burden families and businesses, particularly as existing loans come due and must be refinanced at significantly higher rates.

A decoupling could favor Bitcoin price

Several factors could lead to the decoupling of cryptocurrencies from traditional markets, such as the S&P 500. If the government encounters difficulties in issuing longer-term debt, it can raise concerns. The failure to issue long-term bonds may indicate fiscal instability, which incentivizes investors to seek hedges against potential economic downturns. In such cases, alternative assets like gold and Bitcoin might become attractive options.

Even with a strong dollar, inflation can force the U.S Treasury to raise the debt limit which leads to currency devaluation over time. This risk remains relevant as investors seek to safeguard their wealth in assets less susceptible to inflation.

Furthermore, the state of the housing market plays a pivotal role. Should the housing market continue to deteriorate, it could negatively impact the broader economy and the S&P 500. The housing market's interconnectedness with the banking sector and the potential for consumer credit deterioration could trigger a flight to assets with scarcity and hedging capabilities.

There's also the potential for political instability, globally or even during the U.S. elections in 2024. This could introduce uncertainty and impact financial markets. In some countries there is a growing fear of capital controls and historical instances of international financial embargoes highlight the risk of governments imposing such controls, further driving investors towards cryptocurrencies.

Ultimately, unlike traditional stocks and bonds, cryptocurrencies are not tethered to corporate earnings, growth or yield above inflation. Instead, they march to their own drumbeat, influenced by factors like regulatory changes, resilience to attacks, and predictable monetary policy. Thus, Bitcoin could vastly outperform the S&P 500 without the need of any of the scenarios discussed above.

Do Bitcoin halvings spark BTC price rallies, or is it US Treasurys?

September 26, 2023 Coin Telegraph

Bitcoin

An intriguing chart shows a close relationship between U.S. 10-year Treasurys and Bitcoin halving price rallies.

The relationship between Bitcoin’s price and U.S. Treasury yields has long been considered a strong indicator due to historical data and the underlying rationale.

Bitcoin halvings vs. 10-year Treasury yields

In essence, when investors turn to government-issued bonds for safety, assets like Bitcoin (BTC), which are considered risk-on, tend to perform poorly.

A noteworthy chart shared by TXMC on X (formerly known as Twitter) makes the argument that Bitcoin halvings have coincided with “relative local lows” in the 10-year Treasury yield. Despite the questionable use of the term “relative,” which doesn’t precisely match a three-month low, it’s still worth examining the macroeconomic trends surrounding past halvings.

#BTC halvings have coincidentally arrived at local lows in treasury yields each of the first 3 times. After these moments, risk assets rose broadly while growth expectations also improved.

Thus a myopic Bitcoin narrative about supply shocks was born. But it was always macro. pic.twitter.com/KGQ4TMeKWC
— (@TXMCtrades) September 18, 2023

First and foremost, it’s important to emphasize that the author asserts that the correlation should not be taken as a “direct causal link between yields and BTC price.” Furthermore, TMXC argues that over 92% of Bitcoin’s supply has already been issued, suggesting that daily issuance is unlikely to be the factor “propping up the asset’s price.”

Could the 10-year yield chart be useful vs. Bitcoin?

First, it’s essential to recognize that human perception is naturally inclined to spot correlations and trends, whether real or imaginary.

For instance, during Bitcoin’s first halving, the 10-year yield had been steadily rising for four months, making it challenging to label that date as a pivotal moment for the metric.

*U.S. government bonds 10-year yield, 2012. Source: TradingView*

One might give some benefit of the doubt since, in fact, leading up to Nov. 28, 2012, yields dipped below 1.60%, a level not seen in the previous three months. Essentially, after the first Bitcoin halving, fixed-income investors chose to reverse the trend by selling off Treasurys, thereby pushing yields higher.

However, the most intriguing aspect emerges around Bitcoin’s third halving in May 2020, in terms of the “relative” bottom of yields. Yields plunged below 0.8% approximately 45 days before the event and remained at that level for more than four months.

*U.S. government bonds 10-year yield, 2020. Source: TradingView*

It’s challenging to argue that the 10-year yield hit its lowest point near the third halving, especially when Bitcoin’s price only gained 20% in the ensuing four months. By comparison, the second halving in July 2016 was followed by a mere 10% gain over four months.

Consequently, attempting to attribute Bitcoin’s bull run to a specific event with an undefined end date lacks statistical merit.

Therefore, even if one concedes the idea of “relative” local lows on the 10-year yield chart, there’s no compelling evidence that Bitcoin’s halving date directly impacted its price, at least in the subsequent four months.

While these findings don’t align with TMXC’s hypothesis, they raise an interesting question about the macroeconomic factors at play during actual Bitcoin price rallies.

No Bitcoin rally is the same, regardless of the halving

Between Oct. 5, 2020 and Jan. 5, 2021, Bitcoin saw a remarkable 247% increase in its value. This rally occurred five months after the halving, prompting us to question what notable events surrounded that period.

For instance, during that time, the Russell 2000 Small-Capitalization index outperformed S&P 500 companies by a significant margin, with a 14.5% difference in performance.

*Russell 2000 small-cap index relative to the S&P 500 (blue, right) vs. Bitcoin/USD (orange, left). Source: TradingView*

This data suggests that investors were seeking higher-risk profiles, given that the median market capitalization of Russell 2000 companies stood at $1.25 billion, significantly lower than the S&P 500's $77.2 billion.

Consequently, whatever drove this movement, it appears to have been associated with a momentum toward riskier assets rather than any trends in Treasury yields four months prior.

In conclusion, charts can be misleading when analyzing extended time periods. Linking Bitcoin’s rally to a solitary event lacks statistical rigor when the upswing generally initiates three or four months after the said event.

This underscores the need for a more nuanced understanding of the cryptocurrency market, one that acknowledges the multifaceted factors influencing Bitcoin’s price dynamics rather than relying solely on simplistic correlations or isolated data points.

What are the 3 assets most correlated with Bitcoin?

August 23, 2023 Coin Telegraph

Analysis

Bitcoin price is closely linked to several financial assets but the reasons for correlation with certain precious metals and stocks can be quite different.

The financial media often points out Bitcoin’s (BTC) correlation to big tech. “Bitcoin is trading like a tech stock” is a common narrative alongside BTC's often acute inverse-relationship with the United States dollar.

But are these correlations set in stone, and can they be useful for predicting future price moves? Let's take a closer look at several reports analyzing the relationship between Bitcoin and various asset types.

Bitcoin's historic correlations vary across timeframes

A report published in October 2022 by the Multidisciplinary Digital Publishing Institute arrived at several key conclusions regarding Bitcoin’s correlations with traditional financial assets, including:

The extreme volatility of the Bitcoin market means that long-term correlations are stronger than short-term correlations;
The “positive linkage between Bitcoin and risk assets increases during extreme shocks” such as COVID-19;
Bitcoin can be positively correlated with risk assets and negatively correlated with the US dollar;
Bitcoin can serve as a hedge against the US dollar.

While some of these points can be countered with newer price data over the last 9 to 10 months, such as a major drop in volatility, insight can still be gained from examining them. In addition, other researchers have gone deeper into the relationship of specific assets to Bitcoin during set timeframes.

Crypto-specific stocks

A few crypto-related equities have been more correlated to Bitcoin than any other assets on the market. The 90-day correlation coefficient for BTC/MSTR, BTC/COIN, and BTC/RIOT have all remained near 1 for the last several months. The symbols "BTC/xxxx" indicate the correlation coefficient for each asset as measured against Bitcoin.

For MSTR, the coefficient has fallen no lower than 0.68 since September 2022. The coefficient for RIOT fell to roughly 0.75 in June 2023, while COIN trended near 0 for a time during May and June.

*COIN, ROIT, and MSTR year-to-date chart with 90-day correlation coefficients compared to BTC. Source: TradingView*

All of these stocks have outperformed Bitcoin so far this year while also showing greater volatility. Investors may be using these assets as proxies for Bitcoin, which can't be bought through a brokerage account.

One reason these three stocks are so closely correlated to Bitcoin has to do with the balance sheet of their respective companies. They all have a substantial amount of Bitcoin holdings.

As seen in the table below, MSTR has the most holdings of any public company with 152,333 Bitcoin. COIN comes in 4th place with 10,766 Bitcoin, and RIOT is in 8th place with 7,094 Bitcoin.

*Bitcoin holdings by public companies. Source: CoinGecko*

Precious metals

When it comes to correlation with commodities and precious metals, in particular, silver actually beats gold in mirroring Bitcoin's price moves since 2019.

A November 2022 report by Jordan Doyle and Urav Soni of the CFA Institute entitled “How do cryptocurrencies correlate with traditional asset classes?” shed some light on Bitcoin's most-correlated assets.

*Crypto and Commodities correlation heat map. Source: CFA Institute*

Silver has been the commodity most closely-correlated to Bitcoin from October 2019 and to October 2022 with a correlation coefficient of 0.26, according to the report. Gold’s correlation, by comparison, was just 0.15, perhaps due to silver’s greater volatility.

The report notes:

Silver has the highest correlation, peaking at 0.26 for silver and bitcoin. Bitcoin, the so-called 'digital gold,' exhibits only weak correlation with the precious metal.

Passive and active equity funds and bonds

When speaking of stocks as a whole and their correlation to Bitcoin, looking at an index or ETF would be the most common way to make a comparison. This provides an overview of the asset class in general rather than zeroing in on one specific stock, which may have any number of factors affecting it.

As might be expected, growth funds tend to be more correlated with cryptocurrencies, presumably due to their more speculative nature. Notably:

“Growth funds exhibit a stronger correlation to cryptocurrencies than value funds. The correlation coefficient between small-cap growth funds and bitcoin, for instance, is 0.41, compared to 0.35 for small-cap value funds and bitcoin.”

*Crypto, equity funds, and bonds correlation heat map. Source: CFA Institute*

In other words, crypto markets as a whole are “weakly sensitive to interest rate dynamics” that were at least partially responsible for a broad drawdown in equities throughout 2022.

Finally, Bonds bear little to no relationship with Bitcoin. Passive bond funds showed a correlation of just 0.11, while active bond funds were just two basis points higher at 0.13. All data points are for the timeframe of October 2019-October 2022.

Bitcoin's correlations are not a crystal ball

Due to Bitcoin’s large price swings, all correlations can change at a moment’s notice. Still, the data used here provides an accurate picture of the assets most closely correlated to Bitcoin in the recent past.

It's likely that crypto-specific stocks will continue having a strong correlation due to their Bitcoin holdings, while the correlation with commodities and equity funds could quickly change course going forward.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Can Bitcoin repeat a 2017-like rally as dollar correlation reverses?

July 5, 2023 Coin Telegraph

Bitcoin

The Dollar Index disconnect from Bitcoin does not necessarily mean that BTC price is about to experience a big rally, historic data suggests.

There is a common belief that when the U.S. dollar declines relative to other main global currencies, as measured by the Dollar Strength Index (DXY), the impact on Bitcoin (BTC) is positive, and vice versa.

For instance, the DXY index dropped from 103.0 on Jan. 2017 to a 92.6 low on Aug. 2017, while Bitcoin rallied from $1,000 to $4,930 in the same period. But is there enough evidence to justify a bull run similar to 2016–17, as some analysts are arguing?

But is there enough evidence to justify a bull run similar to 2016–2017, as some analysts are arguing?

Is the Bitcoin-dollar inverse trend real?

Traders and influencers frequently warn about this negative correlation and how a reversal of DXY will likely push the Bitcoin price higher.

Investment research @GameofTrades_ recently posted a chart presenting the pattern in early 2023 and then repeating itself later in May. There’s some indisputable evidence of the inverse correlation there.

Bitcoin and DXY have maintained a negative correlation year-to-date in 2023 pic.twitter.com/VTePX3PNs6
— Game of Trades (@GameofTrades_) June 22, 2023

Moreover, technical analyst el_crypto_prof presents a bearish "Gaussian Channel" change on the DXY chart, which, according to the analysis, matched two previous bull runs for Bitcoin and altcoins in 2016–17 and 2020–21.

#Bitcoin

The DXY (US Dollar Index) has changed the color from green to red on the Gaussian Channel.

The last two times this happened, $BTC and Altcoins experienced a bullrun (parabola) in the following months (2016-2017 and 2020-2021).

Sounds exciting, doesn't it? pic.twitter.com/kHJeM6iZDH
— ⓗ (@el_crypto_prof) June 26, 2023

BTC-DXY correlation varies with time

The seemingly inverse relationship between Bitcoin and DXY have never lasted more than 7 weeks. The correlation indicator runs from -100%, indicating that certain markets move in opposite ways, to 100%, indicating that the movement is in lockstep; 0 represents a total lack of correlation between the two assets.

*Dollar Index DXY 20-day correlation versus Bitcoin. Source: TradingView*

The metric has been negative for 81% of the past 670 days, indicating that DXY and Bitcoin have generally followed an inverse trend. Still, that’s not how the correlation metric works, because readings between 0% and -50% denote a lack of correlation.

In fact, the longest-ever period of a correlation lower than -50% has been the 47 days starting on Aug. 18, 2022. Therefore, saying that Bitcoin has an inverse correlation to the DXY index would be statistically incoherent since it was -50% or lower for less than a third of the days since September 2021.

Between June 2021 and November 2021, the DXY and BTC price presented a very similar pattern as both rallied during that five-month period.

Events solely relevant to the cryptocurrency might have distorted the metric, however, such as the first U.S. Bitcoin futures exchange-traded fund launch on October 19, 2021.

*Dollar Index DXY (orange, left) vs. Bitcoin (blue), 2021. Source: TradingView*

But regardless of the rationale behind the move, correlation is not causation, meaning it is impossible to conclude that DXY’s positive performance affected Bitcoin price during the period.

Longer-term analysis still required for DXY

Even though analysts and market influencers frequently use 20-day correlation data to explain daily price fluctuations, a longer time frame is required to comprehend any potential, if any, effects of DXY on Bitcoin's price.

For instance, when the U.S. Federal Reserve injects trillion-dollar stimulus packages into the economy, odds are the impact on inflation and global currency flows will take a couple of weeks. After all, not every family, business, and financial institution will put the money in circulation right away.

But the price signals on the Bitcoin market are more immediate as coins are traded 24/7. So the price movements are extremely susceptible to news, macroeconomic data, and geopolitical events, with reverberating effects for weeks and even months.

A perfect example can be demonstrated by Bitcoin’s 38% loss in nine days on June 8, 2022.

*Dollar Index DXY (orange, left) vs. Bitcoin (blue), 2022. Source: TradingView*

Notice how it took almost 4 months for the DXY index to move from 102.50 to the 114.2 peak by late Sept. 2022, even though Bitcoin had already bottomed at $18,900 long before that.

DXY a poor proxy for BTC price

In other words, those betting on the DXY index reversal preceding a BTC price rally have no statistical support given that the correlation varies over time.

Moreover, even when the inverse correlation happens, there may be a gap between Bitcoin's immediate price action and the longer term trends of the Dollar Strength Index.

Whenever favorable (or unfavorable) developments in the cryptocurrency industry occur, the historical correlation becomes irrelevant. That might have been the case impacting the recent Bitcoin gains, which can't be directly attributed to the supposed "Gaussian Channel" reversion on the DXY chart.

Ultimately, cherry-picking two or three instances of DXY index inverse correlation happening while a cryptocurrency bull run occurred in the past is not enough to call a bull run similar to 2016–17, considering the multiple instances of positive correlation and gaps between both assets' price action.

US Treasury yields are rising — What does it mean for Bitcoin price?

June 25, 2023 Coin Telegraph

Coin Telegraph

The 5-year U.S. Treasury yield reached its highest level in 3 months, but the typical inverse correlation-based price action with Bitcoin might not work this time.

United States Government bonds, or Treasurys, have a tremendous influence across all tradeable markets, including Bitcoin (BTC) and Ether (ETH). In that sense, risk calculation in finance is relative, so every loan, mortgage and even cryptocurrency derivatives depend on the cost of capital attributed to U.S. dollars.

Assuming the worst-case scenario of the U.S. government eventually defaulting on its own debt, what happens to the families, businesses and countries holding those bonds? The lack of interest debt payments would likely cause a global shortage of U.S. dollars, triggering a cascading effect.

But, even if that scenario comes to fruition, history shows us that cryptocurrencies may work as a hedge during periods of uncertainty. For instance, Bitcoin vastly outperformed traditional wealth preservation assets during the U.S.-China trade war in May 2021. Bitcoin gained 47% between May 5 and May 31, 2021, while the Nasdaq Composite shed 8.7%.

As the general public owns over $29 trillion in the U.S. Treasury, they are deemed the lowest risk in existence. Still, the price for each of those government bonds, or the yield traded, will vary depending on the contract maturity. Assuming there’s no counterparty risk for this asset class, the single most important pricing factor is the inflation expectation.

Let’s explore whether Bitcoin’s and Ether’s price will be impacted by the growing demand for U.S. Treasurys.

Higher demand for government bonds leads to lower yields

If one believes that inflation will not be restrained anytime soon, this investor is likely to seek a higher yield when trading the Treasury. On the other hand, if the U.S. government is actively devaluing its currency or there's an expectation for additional inflation, investors will tend to seek refuge in US Treasurys, causing a lower yield.

*U.S. 5-year government bond yield. Source: TradingView*

Notice how the 5-year Treasury yield reached 4.05% on June 22, the highest level in more than three months. This movement happened while the U.S. Consumer Price Index (CPI) for May came in at 4.0% on a year-over-year basis, the lowest growth since March 2021.

A 4.05% yield indicates that investors are not expecting inflation to drop below the central bank's 2% target anytime soon, but it also shows confidence that the 9.1% peak CPI data from June 2022 is behind us. However, that’s not how Treasury pricing works because investors are willing to forego rewards in exchange for the security of owning the lowest-risk asset.

U.S. Treasury yields are a great tool for comparing other countries and corporate debt, but not in absolute terms. These government bonds will reflect inflation expectations, but they may be severely constrained if a global recession becomes more likely.

*U.S. 5-year government bond yield vs. Bitcoin/USD (orange). Source: TradingView*

The typical inverse correlation between Bitcoin and the U.S. Treasury yield has been invalidated in the past 10 days, most likely because investors are desperately buying government bonds for their safety regardless of the yield being lower than inflation expectations.

The S&P 500 index, which measures the U.S. stock market, hit 4,430 on June 16, just 7.6% below its all-time high, which also explains the higher yields. While investors typically seek scarce and inflation protected assets ahead of turbulent times, their appetite for excessive equity valuations is limited.

Recession risks could have distorted the yield data

The only certain thing at the moment is that investors’ expectations for a recession are becoming more evident. Aside from the Treasury's yield, the U.S. Conference Board's leading indicators declined for 14 consecutive months, as described by Charlie Bilello:

The Conference Board's Leading Economic Index declined in May for the 14th month in a row.

"We project that the US economy will contract over the Q3 2023 to Q1 2024 period. The recession likely will be due to continued tightness in monetary policy and lower government spending.”… pic.twitter.com/wQfy8a3DVq
— Charlie Bilello (@charliebilello) June 23, 2023

Consequently, those betting that Bitcoin’s recent decoupling from the U.S. Treasury's yield inverse correlation will quickly revert might come out disappointed. Data confirms that government bond yields are higher than normal due to increased expectations of a recession and economic crisis ahead.