First Mover Americas: Bitcoin Below $20K and BTC's Inverse Correlation With Inflation-Adjusted Bond Yield Hits Record High

The latest price moves in crypto markets in context for July 12, 2022.

AccessTimeIconJul 12, 2022 at 1:58 p.m. UTC
Updated Jul 15, 2022 at 2:28 p.m. UTC

Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

Good morning, and welcome to First Mover. I’m Lyllah Ledesma, here to take you through the latest in crypto markets, news and insights.

  • Price Point: BTC dips below $20K, open interest moves upward and more on the unfolding of crypto hedge fund Three Arrows Capital.
  • Market Moves: Omkar Godbole looks at how bitcoin's fortunes are more closely tied to the U.S. real or inflation-adjusted bond yield than ever.

Price Point

Bitcoin (BTC) was trading down 5% on the day, dipping below the $20,000 mark as a sell-off in traditional markets saw equity indexes decline.

If BTC holds the $20,000 support, it should soon be back at $25,000 (resistance), according to Matteo Bottacini, trader at Crypto Finance AG.

“Otherwise, the price is likely range-bounded again between $18,500 and $21,000,” wrote Bottacini in a note Tuesday.

The dollar rallied against all major developed market economies and the euro slipped closer to parity against the greenback on recession concerns.

Ether (ETH), fell by 7.8% over the last 24 hours and is back to trading around $1,000. The cryptocurrency reached a high of $1,250 over the weekend.

In the derivatives market, the amount of open bitcoin and ether perpetual futures contracts have recovered slightly this month, after dropping by double digits in June, according to data from Kaiko.

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Perpetual futures open interest (Kaiko)

Bitcoin perpetual futures open interest rose 11% to $6 billion since the start of this month. Kaiko research notes that this is partly supported by a 7.6% increase in prices. Ether’s open interest rose at a slower pace of 7% to around $3 billion.

The increase was mainly driven by rising open positions on the two largest derivatives exchanges, FTX and Binance, according to Kaiko.

Meanwhile, BitMEX, crypto futures and spot exchange, announced Tuesday it has delayed listing its Ethereum-based BMEX token because of current market conditions.

“We have made the decision to postpone the listing of the BMEX Token on our spot exchange,” it said. “The reason is quite simple. Although we are ready to list BMEX, the present market conditions are not ideal, and we want to list the token in an environment that gives it the best chance to reward you, its holders.”

In other news, Sam Reynolds reported that Three Arrows Capital co-founder Su Zhu broke his Twitter silence Tuesday by posting screenshots of an email sent from his legal counsel to legal representatives of Three Arrows' liquidators, alleging they are "baiting" Zhu and co-founder Kyle Davies and ignoring their attempts to work with them in good faith.

According to a report from Reuters, cryptocurrency exchange Binance failed to deliver on money-laundering prevention promises. Binance operated outside the rules that many rival firms follow, while being ambiguous over the jurisdiction in which the main business is located, the news organization said.

And finally, Celsius Network, the troubled crypto lender, paid down $95 million of its debt to the Aave and Compound decentralized finance (DeFi) platforms.

Biggest Gainers

Asset Ticker Returns DACS Sector
Polygon MATIC +1.2% Smart Contract Platform
Loopring LRC +1.1% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Terra LUNA −9.3% Smart Contract Platform
Cosmos ATOM −9.2% Smart Contract Platform
Gala GALA −7.1% Entertainment

Market Moves

By Omkar Godbole

Bitcoin's Inverse Correlation With Inflation-Adjusted Bond Yield Hits Record High

Bitcoin's fortunes are more closely tied to the U.S. real or inflation-adjusted bond yield than ever, with the two increasingly moving in opposite directions.

At press time, the 90-day correlation coefficient between bitcoin and the yield on the 10-year U.S. inflation-indexed security stood just shy of the record -0.95 reached at the end of June.

The record inverse or negative correlation means bitcoin is moving in the opposite direction of the inflation-adjusted yield. A correlation coefficient is a number between +1 and -1, representing the linear interdependence of two variables or sets of data. If the correlation coefficient is -1, it means relationship between the two variables is negative 100% of the time. If the number is at +1, the two securities move in the same direction.

A positive real yield means the bond payout is exceeding the market-based measures of inflation expectations. Therefore, the higher the real yield, the lesser the incentive to chase returns from other assets like cryptocurrencies, stocks and gold.

So, it's no surprise that bitcoin, technology stocks and gold have taken a beating this year alongside an uptick in the real yield. The real yield has surged by more than 172 basis points to 1.72% this year, thanks to the U.S. Federal Reserve's resolve to drain liquidity with rapid-fire interest rate hikes and balance sheet run-off to fight rampant inflation. While the leading cryptocurrency by market value has dropped nearly 57%, the tech-heavy Nasdaq index and gold are nursing a 27% and 5.2% loss, respectively.

The record negative correlation means the possibility of bitcoin plunging below the June low of $17,601 cannot be ruled out should the real yield continue to rise. And to the dismay of bulls cheering the bottom signals on blockchain indicators, the path of least resistance for the real yield appears to be on the higher side. That's because, inflation is showing no signs of slowing down and the Fed is unlikely to apply brakes to policy tightening anytime soon.

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This web version of today's First Mover newsletter was produced by Sage D. Young.


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Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

CoinDesk - Unknown

Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

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