Bitcoin and Bond Yields: A Long-Term Disconnect

Bitcoin's price dropped from approximately $87,200 to $83,500 as Treasury yields surged this week. The increase in bond yields led to a familiar explanation for crypto weakness: when investors can earn more than 5% from government bonds, a volatile asset that pays no income becomes harder to own.

However, the long-term data suggest that rising bond yields don't necessarily determine Bitcoin's performance over time. An analysis of Bitcoin and Treasury yields found that their long-term return correlation has hovered near zero for much of Bitcoin's history.

The relationship between bond yields and Bitcoin's price starts breaking down when looking at extended periods. There have been times when both Bitcoin climbed alongside yields and others when both fell, making the level of rates surprisingly poor as a standalone explanation for the cryptocurrency's performance.