Bloomberg strategist explains why 30-year US bonds have ‘bullish implications’ for Bitcoin

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Although Bitcoin (BTC) falls back below $ 50,000, more investors are likely to move their capital to the Bitcoin and gold markets in the second half of 2021 (S2), said Mike McGlone. , senior commodities strategist at Bloomberg Intelligence, Aug.23.

The financial analyst cited the consistently lower yields offered by the 30-year US Treasury note as the reason for his upside prediction. He noted that if its rate of return persists below 2%, it could improve the price discovery stage for Bitcoin while also posing a competitive advantage for traditional safe-haven assets like gold.

#Bitcoin, #Gold & Long #Bonds: Three Amigos for a 2H appreciation? Keeping the 30-year US Treasury yield below 2% has bullish implications for gold and Bitcoin. Unlike the stock market, the old analog store of value and the new digital version share substantial corrections. pic.twitter.com/UYanE4sPSb

Mike McGlone (@ mikemcglone11) August 23, 2021

“Unlike the stock market, the old analog store of value and the new digital version share substantial corrections,” McGlone added, referring to the small reversion of the S&P 500 index in the first half of 2021 (S1), which increases its potential. . to correct lower in H2.

In turn, it is organizing new capital for other markets with extreme upside potential, such as Bitcoin.

Bitcoin, Gold and US Bond Index versus S&P 500 Total Return Index. Source: Bloomberg Intelligence

“The S&P 500 up or down 10% in 2H offers a simple binomial pattern,” the Bloomberg analyst wrote in a research note in July.

“If rising, that would be about 3 times the annual norm since 1928 and take the Bloomberg Galaxy Crypto Index above the 1H gain of around 80%. If lower, bond yields would likely follow and Bitcoin could be the primary beneficiary. “Bitcoin to hit new record?

The Federal Reserve’s unprecedented interference in the bond market after the March 2020 stock market crash pushed rates down. Institutional investors who are ideally looking for 5% annual yields in the bond market to curb inflationary pressures are now grappling with short-term bonds, some of which offer sub-zero yields.

Meanwhile, yields on longer-term Treasuries have also fallen to record lows. This has forced investors to seek alternatives in the riskier parts of the financial markets, higher yielding debt-free investments like Bitcoin.

“It was the violation of [the 2%] threshold in 2020 which preceded the risk fading and laid the groundwork for Bitcoin to reach new highs this year, ”the Bloomberg research noted.

Yield of the 30-year US Treasury relative to the price of Bitcoin. Source: TradingViewTapering and Jackson Hole

McGlone’s statements about bonds and the Bitcoin correlation come as Federal Reserve Chairman Jerome Powell prepares to deliver a speech at the Jackson Hole summit this week, typically one of the most influential economic events.

The Fed’s efforts to reduce its bond buying policy by $ 120 billion per month should be a dominant theme at the (virtual) Jackson Hole meeting. Investors will be watching Powell’s words for any clue as to how and when the US central bank will begin its reduction program.

At their July 2728 meeting, Fed officials agreed to begin easing their bond buying policy amid optimistic prospects for economic growth and the job market.

Nonetheless, the 30-year Treasury yield remained lower following the news, with reports surfacing that investors were still expecting economic downturns due to the spread of the COVID-19 Delta variant.

“Many clients did not particularly understand how the rate markets have moved, which has brought a degree of caution that you would not normally see,” Guneet Dhingra, head of rate strategy, told the Financial Times. interest in the United States at Morgan Stanley.

Related: Bitcoin Bullish Cross On Weekly Chart Paints A BTC Price Target Of $ 225,000 If History Repeats Itself

After the Fed’s outlook on August 18, the price of Bitcoin rose more than 14% to a three-month high of $ 50,784.

Bitcoin Daily Price Table. Source: TradingView

The BTC / USD exchange rate fell below $ 50,000 on August 23 due to sentiment of profit taking. At its low, the pair’s bid was $ 49,369.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move comes with risk, and you should do your own research before making a decision.

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