U.S. Bond Yields & National Debt Bullish for Bitcoin

The potential bullish run of Bitcoin is influenced by rising U.S. bond yields and increasing national debt.

Bitcoin, the premier cryptocurrency, is poised for another bullish run. One of the driving factors? A unique economic phenomenon stemming from the United States’ financial landscape. Arthur Hayes, the former CEO of the crypto platform BitMEX, has identified the U.S. government’s financial maneuvers as a potential catalyst for this change. Here’s a deeper dive into what’s happening and how it impacts the cryptocurrency domain.

The ‘Bear Steepener’ Phenomenon

The term ‘bear steepener’ might sound complex, but it essentially captures a scenario where long-term interest rates increase faster than their short-term counterparts. This rapid rise in rates, especially with a focus on the 2s30s curve – a metric that denotes the difference between the 30-year and 2-year yields – is putting immense pressure on the economy.

Hayes points out that bank models aren’t fully equipped to handle or even comprehend a ‘bear steepener.’ As these yields shoot up, it pushes banks into a tricky situation. The increased rates mean banks will likely engage in more selling, further pushing down bond prices. This domino effect, according to Hayes, will culminate in the need for massive liquidity injections to stabilize the economy.

The U.S., in a bid to counteract the economic pressure, had been practicing quantitative tightening since the latter part of 2021. This move inadvertently affected the crypto markets. Now, with the ‘bear steepener’ in play, Hayes believes a reversal is imminent. The liquidity injection will be the U.S.’s only way out, which, although necessary, will have its share of casualties.

Trading Data & Bitcoin’s Potential Rise

Supporting Hayes’ predictions, recent data from TradingView revealed a significant milestone. The 30-year U.S. government bonds yield touched 5% this week. This hasn’t happened since way back in August 2007, right before the Global Financial Crisis. This spike in yields and the evident correlation with Bitcoin’s market movements underline the cryptocurrency’s potential bullish trajectory.

Philip Swift, a renowned figure in the crypto domain and co-founder of trading suite Decentrader, concurred with Hayes’ outlook. Swift shed light on Bitcoin’s association with treasury yields through illustrative charts. In his assessment, a theoretical shift towards increasing the money supply could be the primary catalyst pushing Bitcoin into its next bull market.

U.S. National Debt Skyrockets

While the financial world buzzes about Bitcoin’s potential surge, there’s another alarming trend unfolding in the U.S. The nation’s national debt is soaring at an unprecedented rate. Just a fortnight after the debt counter crossed the $33 trillion mark, the government added an astounding $275 billion in a single day.

Financial pundits and analysts haven’t overlooked this rapid accumulation of debt. To put things into perspective, Samson Mow, the CEO of Bitcoin adoption firm Jan3, highlighted the magnitude of this national debt increment. He pointed out that the U.S. added debt equivalent to over half of Bitcoin’s entire market cap in just one day. To further emphasize the potential of Bitcoin, he drew attention to its current trading price, which hovered around $27,500.