Bitcoin's Macro Exposure: A Growing Concern

Bitcoin's recent price action is in line with a trend researchers have observed since 2020, where the cryptocurrency becomes more sensitive to macroeconomic moves. On September 24, Bitcoin dropped below $84,000 as the 10-year Treasury yield reached its highest level since 2004 at 5.145%, while the 30-year yield surpassed 5.44%. This move was driven by strong US economic data and higher energy prices, leading to increased expectations of further Federal Reserve tightening.

The price drop in Bitcoin occurred alongside weakness in other risk assets as bond yields rose. According to academic research, this kind of immediate macro reaction was less consistent during Bitcoin's earlier years. In fact, a 2023 study found that Bitcoin and crypto have become more sensitive to macro moves since 2020.

This increased sensitivity to macroeconomic changes poses a potential downside risk for risk assets when yields rise. As such, investors should be aware of this trend and its implications for their portfolios.