A crypto perfect storm? Bond yields, ETF news collide with bitcoin rally

Macro and micro moves combine to push bitcoin to pre-Terra levels

article-image

William Potter/Shutterstock modified by Blockworks

share

Macro and macroeconomic conditions joined forces this week to create what appears to be a perfect storm for bitcoin’s price. 

The price of bitcoin surged above $34,000 Tuesday for the first time since May 2022 as US bond yields hit a 16-year high and ongoing optimism about the prospects of a bitcoin ETF continued to grow. 

Bitcoin (BTC) rallied nearly 14% in less than 24 hours between Monday and Tuesday, largely fueled, analysts say, by news that a spot bitcoin ETF may be here soon

The iShares Bitcoin Trust was listed on the Depository Trust and Clearing Corporation, which clears Nasdaq trades, on Monday, Bloomberg Intelligence ETF analyst Eric Balchunas announced, sending traders into a frenzy. (It has since been removed.)

Read more: BlackRock takes apparent new step in bitcoin ETF prep

This development, in and of itself, does not mean an ETF is launching. But it was enough to move markets, according to Noelle Acheson, former head of research at Genesis Trading and author of the Crypto is Macro Now newsletter.

“This doesn’t necessarily mean that the ETF (ticker symbol IBTC) will start trading today, nor that it is imminent,” Acheson said. “But, you know, maybe. The possibility is waking up some investors.”

On the macroeconomic side, rising US bond yields — perhaps counterintuitively — have coincided with bitcoin’s rise. 

“In theory, rising yields would be bad for BTC because they signal a tightening of monetary liquidity (which punishes risk assets), they draw funds away from non-yielding assets, and they boost the US dollar which is the denominator of the most-quoted BTC/USD pair,” Acheson said. 

Early in the trading session Monday, US bond 10-year yields rose above 5% for the first time since 2007 before falling to around 4.8% Tuesday, coinciding with bitcoin’s rise. 

Bond yield moves managed to push stocks higher, too, Tom Essaye, founder of Sevens Report Research noted. The Nasdaq Composite and S&P 500 indexes were trading about 0.8% and 0.7% higher Tuesday, coinciding with the 10-year’s decline. 

Global moves — namely the Bank of Japan’s upcoming policy meeting — are also playing into US equity market moves, Essaye said, although its impact on crypto is less notable. 

“While a lot of the early rise in the 10-year yield to 5.00% was momentum driven, there was a fundamental reason, too: the Bank of Japan,” Essaye said. “There is ‘chatter’ in the market that the BOJ may increase the limit on the 10-year Japanese Government Bond (JGB) at the meeting later this week.” 

Still, crypto investors seem to be concerned about missing out on the rally, according to Acheson, so volatility should be expected. 

“Let’s remember that BTC liquidity is not exactly high these days, so it wouldn’t take much to trigger strong moves,” Acheson added. 

Updated, Oct. 24, 2023 at 13:00 — Added the Blackrock’s proposed ETF is no longer listed by DTCC.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume