There is usually a connection between bitcoin and inflation in the United States. Indeed, it is constant to see the flagship crypto market affected by the level of inflation. This is also a fact that traders follow very closely.
Opposite Movement of Bitcoin and US Real Yield
After stagnating for weeks, the price of bitcoin (BTC) has recently plunged. The asset is currently trading around $26,000. Its price has fallen by around 10% in the past week.
At the same time, the US real yield indicates an opposite trend. The concept refers to the rate of return of a bond adjusted for inflation. In other words, the yield takes into account the impact of inflation on the real value of the bond’s earnings.
This concept is no stranger to the bitcoin market. The latter usually maintains a close link with the real US yield. A report which makes that in normal times, this is an indicator of the situation prevailing on the bitcoin market.
Only, the evolution in tandem between the bitcoin market and the US real return has been somewhat reversed lately. This is what show the latest information from the dynamic analysis around the BTC.
Thus, bitcoin and the US real yield now show a strong negative correlation. Concretely, this means that the movement of bitcoin and the US real yield are moving in opposite directions.
A first since April 2023!
The analysis of the correlation coefficient between bitcoin and the 10-year security indexed to US inflation is revealing. It shows that over the month of August, it went from +0.28 to -0.72. Knowing that a correlation coefficient of 1 implies a synchronous movement.
When it is -1, it indicates total opposition. According to TradingView, you have to go back to April to observe a similar trend. A dynamic, which is not bad news in itself for the crypto industry.
Indeed, this change in correlation underlines a positive impact on the price of bitcoin. A trend that must be linked to the renewed influence of conventional finance and macroeconomic factors.
While the bitcoin market is currently pounding, a potential further surge in its price remains likely. Especially when you know the habits of investors when real returns are negative. In such situations, they are often inclined to seek alternative returns in high-risk assets. Tech stocks and cryptos fall into this category.
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