Case for Bitcoin Weakens as Global Stockpile of Sub-Zero Bond Yields Vanishes
Back in late 2020, analysts regularly cited the towering stockpile of negative-yielding debt as a source of bullish momentum for bitcoin.
Jan 6, 2023 at 9:26 a.m. UTCUpdated Jan 6, 2023 at 4:50 p.m. UTC
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Total negative-yielding bonds outstanding (Source: Bloomberg, Bianco Research)
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With central banks around the world raising interest rates at a record pace to combat inflation, the global stockpile of negative-yielding bonds has vanished, weakening the case for harvesting returns from risky alternative assets like cryptocurrencies.
- The value of the Global Negative-Yielding Debt Index from Bloomberg and Barclays has dropped to zero from a record $18.4 trillion in December 2020.
- A negative-yielding bond offers less money at maturity than the original buying price.
- The amount of negative-yielding debt rose sharply following the coronavirus-induced crash of March 2020 as central banks injected record liquidity via rate cuts and bond purchases to cushion markets and the economy from the adverse impact of COVID-19.
- The resulting hunger for yields saw investors rotate money out of fixed-income securities and into bitcoin (BTC) and tech stocks.
- Bitcoin chalked up a sixfold rally to record highs above $60,000 in the six months to April 2021.
- Bond yields remain negative when adjusted for inflation, as measured by the Consumer Price Index. It remains to be seen, however, if that helps bring more money into the bitcoin market.
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Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.