Bitcoin’s (BTC) rally could be thanks to the US government, according to a new forecast.
In an X-thread on October 4, Arthur Hayes, former CEO of crypto exchange BitMEX, viewed rising yields as a harbinger of a new Bitcoin and crypto bull market.
Hayes: Bitcoin bulls should keep an eye on the “no way out” moment in the US
Treasury yields are “screaming higher” and Hayes believes a macroeconomic crisis point is only a matter of time.
The reason for this is a so-called “bear steepener” – a phenomenon that describes long-term interest rates rising faster than short-term ones.
“Why do I love these markets now when the yields are screamingly higher? Bank models do not assume a bear steepener will occur,” he argued.
Given the current steep rise in the 2s30s curve – the difference between 30-year and 2-year yields – combined with rising long- and short-term interest rates, pressure is increasing across the economy.
“Because of the leverage and nonlinear risks embedded in banks’ portfolios, when interest rates rise, they will sell bonds or make fixed payments to the IRS. “More sales leads to more sales, which is not a boon for bond prices,” Hayes continued.
The outcome should be clear – a return to massive liquidity injections, counteracting the quantitative squeeze observed since late 2021 that has put pressure on crypto markets.
For Hayes, this can’t happen without major losses along the way. He concluded:
“The quicker this bear steepens, the quicker someone goes bankrupt, the quicker everyone realizes there is no other way out than printing money to save the treasury bond markets, the quicker we get back to the crypto bull market :).” The Lord is my shepherd, I shall not want.”1-month US 30-year bond yield chart. Source: TradingView
Separate data from TradingView shows the 30-year U.S. Treasury yield hit 5% this week, a first since August 2007, before the global financial crisis.
Philip Swift, creator of statistics resource LookIntoBitcoin and co-founder of trading suite Decentrader, continued the discussion and expressed his support for Hayes’ prediction.
An accompanying chart showed Bitcoin’s relationship to Treasury yields.
“This would be THE main catalyst for the Bitcoin bull market,” he commented on a theoretical return to expanding the money supply.
Treasury yields vs. annotated BTC/USD chart. Source: Philip Swift/X
US debt experiences its own “Uptober”
At the same time, the US continues to increase its record-breaking national debt at an astonishing pace.
Related: Bitcoin analysts still predict BTC price crash to $20,000
Two weeks after the debt first topped $33 trillion, the government increased its total debt by $275 billion in just one day.
This did not go unnoticed among financial commentators.
Total U.S. debt rose by $275 billion in one day – the same amount as last month’s total borrowings.
Still –
• Unskilled foreign men of military age invade
• Violent criminals caught and released
• Outdoor drug use
• American culture in ruins
The US doesn’t work for you. pic.twitter.com/03YUxyiQtB
— Joe Consorti ⚡ (@JoeConsorti) October 3
“In a single day, the US borrowed more than half of Bitcoin’s total market cap,” responded Samson Mow, CEO of Bitcoin adoption firm Jan3.
“That’s about 10 million BTC.” And yet there are still people who are unsure whether $27,000 is a good buying price.”
BTC/USD 1-hour chart. Source: TradingView
At the time of writing, BTC/USD was trading at around $27,500.
This article does not contain any investment advice or recommendations. Every investment and trading activity involves risks and readers should conduct their own research when making their decision.
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