Bitcoin Marks Record Inverse Correlation with Inflation-Adjusted Bond Yield

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Azeez Mustapha

Updated: 13 October 2022

Reports show that Bitcoin (BTC) has become more closely tied to the US real or inflation-adjusted bond yield in recent times, with the two becoming increasingly polarized with each other.

Currently, data from CoinDesk shows that the 90-day correlation coefficient between the flagship cryptocurrency and the yield on the 10-year US Treasury bond neared the -0.95 peak recorded in late June.

The current inverse correlation indicates that Bitcoin is on an inverse trajectory compared to the inflation-adjusted yield. For better understanding, a correlation coefficient falls anywhere between +1 and -1, representing the linear interdependence of both sets of data. That said, a correlation coefficient of -1 means the relationship between both assets is negative 100% of the time. At the same time, a correlation coefficient of +1 means both assets move 100% in the same direction.

The report further detailed that a positive real yield indicates the market-based measures of inflation expectations. As a result, a higher real yield translates to a lower incentive to purchase assets like cryptocurrencies, stocks, and gold.

This explains why Bitcoin, tech stocks, and gold have suffered heavy losses this year alongside a bullish pattern in the real yield. At press time, the real yield has surged by over 172 basis points (bps) to 1.72%, thanks to sentiment support from the US Fed’s decision to mop up liquidity with aggressive interest rate hikes and balance sheet tapering.

Key Bitcoin Levels to Watch — July 12

In an unexpected turn of events, Bitcoin suffered a breach below the $20,000 consolidation zone after a three-day slump from the $22,000 area. The 4-hour Stochastic indicator now scrapes below the critical 20.00 base, highlighting the absence of any opposing bullish force.

BTCUSD –4-Hour Chart on Gemini. Source: TradingView.

That said, a bearish resumption to the $19,000 level, and possibly $18,000, return on the cards. In the meantime, any rebound attempt from this level should be repelled by the 100 EMA at the $20,700 mark.

Meanwhile, my resistance levels are at $20,700, $21,000, and $22,000, and my key support levels are at $19,000, $18,000, and $17,000.

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Bitcoin Dominance: 42.9%

Market Rank: #1

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