World's Growing Stockpile of Negative-Yielding Debt a Positive for Bitcoin, Say Analysts

The search for profit is likely to intensify with amount of global debt offering negative yields more than doubling in the past seven months

Oct 15, 2020 at 11:46 a.m. UTC
Updated Sep 14, 2021 at 10:09 a.m. UTC

A global surge in negative-yielding bonds is likely to bolster bitcoin's appeal as an alternative investment over the long run, experts say.

  • The amount of global debt offering negative yields has more than doubled to $16.3 trillion in the past seven months to hit the highest level since April 2019, as noted by macro analyst Holger Zschaepitz.
  • In other words, currently, over $16 trillion in such bonds is guaranteed to incur losses if held till maturity.
  • With central banks buying bonds at a frantic pace to support the global economy, the tally of negative-yielding debt is heading toward a fresh record high above $17 trillion.
  • As such, the search for yield is likely to intensify, leading to increased rotation of money out of bonds and into perceived inflation hedges such as bitcoin, according to Stack Fund CEO Matthew Dibb.
  • "Going forward, the search for yield is likely to be a major driver of growth in bitcoin's price and adoption," Dibb told CoinDesk .
  • So far stocks have been the major benefactor of negative-yielding bonds, he added.
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Global negative-yielding debt

  • Economist and trader Alex Kruger told CoinDesk he expects the soaring negative-yielding debt to reignite bitcoin's bull run once the uncertainty brought by the U.S. presidential election is out of the way.
  • The cryptocurrency has rallied by nearly 200% over the past seven months alongside the spike in the negative-yielding debt.
  • The period started with the "Black Thursday" markets crash on March 12. Year to date, bitcoin is up 58%.
  • The recent disclosures of bitcoin investments by companies like Stone Ridge Asset Management and payments company Square have boosted bitcoin's appeal as an alternative asset.
  • While the broader outlook is bullish, in the short term, the cryptocurrency remains vulnerable to bouts of sell-off in the global equity markets.
  • At press time, bitcoin is changing hands near $11,300, representing a 1% decline on the day. Prices clocked a high of $11,723 earlier this week.
  • Stock markets, too, have come under pressure this week due to the resurgence of coronavirus across Europe and deadlock in Washington over additional fiscal stimulus.
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