Real world factors often influence the price of Bitcoin. Right now, crypto investors are struggling to keep track of some dizzying variables: the COVID-19 pandemic, global crypto regulations, Federal Reserve measures, government bonds, etc.
Finally, investment analyst Anthony Pompliano discussed a surprising trend that several other market watchers have noticed when comparing Bitcoin to bond yields.
Do you “halve” some Bitcoin?
Pompliano initially wondered what would happen to Bitcoin if the Fed hiked rates. Many experts are said to be concerned that this rate hike will result in riskier asset sell-offs. Bitcoin could be one of them.
However, Pompliano wondered if Bitcoin’s price spike over the past two years might be less related to US government action than it was to its halving in 2020, he said:
“However, this inverse relationship is not what we see between the returns on Bitcoin and US Treasuries. We are actually seeing the exact opposite. Bitcoin’s price appears to be moving in a ladder with government bond yields. ”
My name is bond Government bonds
To refresh your memory, the yield on government bonds refers to the yield on bonds – or debt securities – of the U.S. government. Technology professionals have theorized that as bond yields rise, technology stocks or risky assets fall.
But according to Pompliano and others in the Bitcoin community, this trend is changing and the two arguably go well together – at least for now.
The direct relationship between $ BTC and 10 year Treasury yields continue to be reported. This is NOT the dynamic we normally see between risky assets and returns. Usually they have an inverse correlation, not a direct correlation. #Bitcoin serves as protection against inflation. Complete subject pic.twitter.com/OxwbDWkJOM
– Caleb Franzen (@CalebFranzen) December 17, 2021
Pompliano commented:
“But it gets interesting when the popular consensus view is out of place and Bitcoin will really benefit from the rate hike. That would violate the framework by which many have viewed digital currency. ”
Ultimately, the executive concluded that if Bitcoin rises with interest rates, a “whole new group of investors” could start watching the market.
Pay attention to your “fence”
If you bought bitcoin at the start of the COVID-19 pandemic, is now the time to rejoice or regret? According to a report released by Arcane Research, an investor who bought Bitcoin in January 2020 will have “great” inflation protection during the pandemic.
In addition, their purchasing power will increase by 520%.
The report says
“Bitcoin’s unprecedented returns during this period of high inflation show that Bitcoin is indeed a great inflation hedge.”