Rising bond market bodes well for another Bitcoin bull run

The bond market heated up last week as stocks began to fall. As a result, Treasury yields (the coupon bondholders receive for buying a bond) are falling dramatically.

This could be bullish news for the price of Bitcoin.

Bonds ended last week with the biggest one-day point gain in 16 months as investors fled Wall Street’s record valuations. Historically, when market sentiment works this way, a Bitcoin bull run is usually not far away.

Risk Out: US Treasury yields are falling fast

As the price of Bitcoin and stock markets around the world rebound from one of the worst financial shocks in living memory, investors are piling into US Treasuries for protection.

Also, the strange inverted yield curve that has gripped bond markets for months turned upside down in a worrisome sign that the economy could be about to slow sharply.

James Athey, portfolio manager at Marlborough Investment Management, said: “History says that when the curve goes back to a positive slope, you’re in a recession. The signs have become a bit more worrying for a while now.”

Jeremy Burton, a high-yield bond and leveraged loan portfolio manager at PineBridge Investments in New York City, said: “There are some people sitting on the sidelines right now who think the economy is going to go into a recession very soon “.

Real Vision Finance: Raoul Pal on bond markets

Government bonds represent one of the safest and most secure means of predicting future cash flows, although they are not without risk due to the potential for prices to rise when the central bank inflates the currency.

The world’s original cryptocurrency, Bitcoin, offers investors a similar feature, albeit in a different way. Bitcoin’s design guarantees a fixed and predictable future supply of BTC on its network to participants who hold currency on its blockchain.

For this reason, Internet retail investors quickly adopted and capitalized on the cryptocurrency during its first decade of existence, a trend that appears to be accelerating after Bitcoin gained approval for regulated exchanges in Bitcoin ETFs from the US Securities and Exchange Commission earlier this year.

When markets need to hedge against inflation, uncertainty in global stocks, or other macro shocks, the same incentives that drive bond market gains are at play in crypto exchange markets. This can have a drastic impact on Bitcoin prices.

As Raoul Pal of Real Vision Finance explained during the bear market of 2022: “the bond market basically dictates the price of ALL risk assets.”

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