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Bitcoin, in Switch From February, Keeps Bullish Tone as US Treasury Yields Rise

About 87% of bitcoin's performance was delivered while the U.S. 10-year bond yield has been rising, one observer said.

Mar 30, 2021 at 9:55 a.m. UTC
Updated Sep 14, 2021 at 12:33 p.m. UTC

Bitcoin is charting gains amid rising bond yields, contrary to the last week of February when firmer yields knocked the wind out of the cryptocurrency's bull market.

The top cryptocurrency by market value is trading near $59,325 at press time, representing a 3% gain on the day. Prices have risen about $8,000 since Thursday, based on CoinDesk 20 data.

The U.S. 10-year Treasury yield is seen at 1.77%, the highest since Jan. 23, 2020. The benchmark yield has gained six basis points today and nearly 20 basis points since March 25.

Bitcoin's resilience is noteworthy and implies a bullish mood in the market. "BTC remains extremely strong, particularly in the face of an appreciating USD and rising treasury yields," Matthew Dibb, COO and co-founder of Stack Funds, told CoinDesk. "Despite historical correlations, bitcoin is bucking the trend even as gold sinks to below $1,700."

Rising yields dilute the appeal of perceived inflation hedges such as bitcoin and gold. The cryptocurrency has become sensitive to macro factors and, more recently, bond yields, with the influx of institutional money in the wake of the coronavirus-induced crash of March 2020. Prices fell by 20% in the last week of February after the U.S. 10-year Treasury yield rose sharply to the then 12-month high of 1.5%.

This time, however, rising yields are struggling to cast a pall on bitcoin's bullish mood. The ever-increasing institutional adoption of bitcoin looks to be overshadowing rising yields, helping the cryptocurrency stay bid.

Stack Funds is "extremely bullish" on bitcoin and expecting a move to new record highs above $62,000 over the coming weeks, Dibbs said.

Bitcoin's price chart

The bearish channel breakout seen in the above chart has shifted the focus to highs above $61,000 registered on March 14. The latest bullish pattern looks similar to the one see at the end of January, following prices rose from roughly $30,000 to $58,000.

Bitcoin may face some selling pressure if yields rise at a faster pace, destabilizing stock markets, as discussed earlier this month. However, Goldman Sachs expects equity markets to digest a 10-year yield of roughly 2% without much difficulty, according to ForexLive.

In the past, bitcoin has performed well in a rising yield environment.

Bitcoin price and U.S. 10-year yield since 2011

"87% of bitcoin's performance was delivered while the U.S. 10-year bond yield has been rising," ByteTree CIO Charlie Morris noted in a blog post. Readers should note that institutional participation in bitcoin was quite low and the cryptocurrency was largely an uncorrelated asset during the previous episodes of yield spikes.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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