A Chinese analyst, a user of the social platform Wechat, discovered an interesting Correlation between 10-year Chinese government bond yields and Bitcoin price growth over the past three bull markets.
This correlation, more than interesting, could reveal the true impact of Chinese investment in Bitcoin. Despite the bans and restrictions imposed around cryptocurrencies in the Asian country, the peaks of its bond yields are congruent with Bitcoin’s highs.
The source of this analysis comes from an account focused on everything related to Web3 and called “Liu Jiaolian.” The article is titled “The Wonderful Correlation Between China’s Long-Term Government Bond Yields and BTC.”
To further explain what this relationship is all about, we have to say that since 2013, when Chinese government bond yields rose to peaks, the price of Bitcoin also experienced a rise.
The report says:
“Since 2013, every rebound trend in China’s 10-year government bond yields has been beautifully consistent with the last three BTC bull markets. This was true in 2013, it was true in 2017, and it remains true from late 2020 through early 2021.”
What exactly does the correlation between China’s national debt and Bitcoin mean?
To illustrate this point, Liu Jiaolian posted the following chart showing the trend of China’s 10-year Treasury bonds compared to the movement of BTC.
I then explain this correlation as follows::
«Generally speaking, rising bond yields indicate a sell-off in the market, which drives down bond prices. Bond selling in the market shows that financial capital’s risk appetite is increasing and they are pulling money out of the bond market to seek higher risk, higher yield opportunities.»
On the other hand, the relationship between Chinese bonds and Bitcoin could be a reflection of broader economic trends. China, being the second largest economy in the world, has a significant influence on global markets..
Let us stress that China has a complicated relationship with cryptocurrencies, implementing various bans and restrictions. However, paradoxically, what the charts show is that Chinese capital has flowed into BTC.
Big capital flows into BTC
It is worth noting that the approach of this analysis coincides with a general and global trend in which capital flows into BTC and other cryptocurrencies following macroeconomic trends. Thus, their correlation with traditional assets increases over time.
It should also be noted that this trend is nothing new, as there has been such a correlation between BTC and other risk assets since 2012. Over the years, prices have become deeply correlated with the value of the dollar.
The unique characteristics of this crypto asset, such as decentralization and fixed supply, led to a sharp increase in its value, even though the correlation with macroeconomic factors was maintained.
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