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Bitcoin decouples from long-term bonds – Why?

2min Read

Bitcoin’s correlation with long-term treasuries has fallen to a 12-month low as general market perception begins to shift.

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  • The correlation between Bitcoin and long-term bonds has fallen to its lowest in the last year.
  • This has been due to the gradual change in the perception of the leading coin.

In the last month, Bitcoin’s [BTC] correlation with long-term bonds has dropped to its lowest in the last year. This signals a significant shift in how the leading crypto asset is viewed and valued, IntotheBlock analyst Lucas Outumuro noted in a new report


Read Bitcoin’s [BTC] Price Prediction 2023-2024


In 2022, rising interest rates led to a decline in both long-term bonds and BTC. The value of bonds fell due to a decline in yields, while BTC’s value plummeted to multi-year lows as investors generally avoided risky digital assets. 

As rate hikes slowed this year, the values of both assets climbed.

However, long-term treasury prices have lagged in the last month while BTC’s price has grown, resulting in a low correlation of -0.74 between them.  

According to data from IntoTheBlock, in the last 30 days, BTC’s price has gone up by 7%, while the value of long-term treasury bond ETF has fallen by 10%.

Source: IntoTheBlock

New perception, who dis?

According to Outumuro, the decline in correlation between the two assets has been due to the evolving perception of BTC. The narrative around the coin has shifted from being viewed as a medium of exchange to a store of value.

In support of his position, Outumuro assessed BTC’s Network Value to Transactions (NVT) Ratio – a measure of the coin’s market capitalization to its on-chain transaction volume – and found that it hit an all-time high in September. 

The analyst opined that the surge in the coin’s NVT ratio signaled that BTC’s value is no longer solely based on its transactional utility. 

Instead:

“In 2023, we have seen demand for Bitcoin pick up as the traditional finance system’s cracks become exposed. In March, as Silicon Valley Bank collapsed and the Fed intervened with the BTFP program, Bitcoin’s price rallied by over 20%.”

According to Outumuro:

“It may be too soon to begin calling for the bull market, but it is clear that the broader market has changed its tone in regards to Bitcoin.”


Is your portfolio green? Check the BTC Profit Calculator


BTC on a daily chart

At press time, BTC traded at $27,924, recording a 2% price uptick in the last 24 hours, according to data from CoinMarketCap

While price continues to linger in a narrow range, accumulation outpaces distribution on a daily chart. At press time, the positive directional indicator (green) stood at 27.83, positioned higher than the negative directional indicator (red) at 9.17, suggesting that buyers’ strength exceeded that of the sellers’

Source: BTC/USDT on Trading View

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Abiodun is a full-time journalist working with AMBCrypto. He is also a lawyer with over 2 years of experience. With a keen interest in blockchain technology and its limitless possibilities, Abiodun spends his time understanding the technology, building projects, and educating people about it.
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