Is BTC a “safe-haven asset”? U.S. Treasury yields indicate a recession is coming | CoinDesk JAPAN

Cryptocurrency proponents have long hailed Bitcoin (BTC) as a safe-haven asset or hedge against economic and political turmoil and weakness in fiat currencies.

Its hedging properties could soon be put to the test as the U.S. Treasury market normalizes through a process called “bull steepening.” This has historically preceded recessions (periods of low economic output and rising unemployment).

The U.S. Treasury yield curve plots the yields on government bonds for various maturities. Typically, this curve is upward sloping, meaning that bonds with longer durations (the payback period for bond investments) offer higher yields than bonds with shorter durations. In mid-2022, the curve reversed, and the yield on two-year Treasuries exceeded that on 10-year Treasuries. The yield spread between 10-year and 2-year Treasuries fell to -100 basis points (bp) in July 2023, before the recovery, often referred to as de-inversion or normalization, began.

The pace of normalization accelerated in January, with spreads rising from -38bp to -0.2bp. The main culprit is bull steepening, in which two-year Treasury yields fall below 10-year yields. The 2-year yield fell by 10 basis points to 4.14% due to expectations of a rate cut from the US Federal Reserve, while the 10-year yield rose 8 basis points to 3.94%.

Historically, a bull steepening is followed by a recession.Anonymous Observer “The Spread Thread”points out. Investment management firm Lord Abbett said the same thing in a blog post last October.

So the ongoing bull steepening could be a sign of an impending recession.

The decline in consumer and business confidence seen during recessions could reduce demand for assets like Bitcoin and technology stocks, but the decline in consumer and business confidence seen during recessions could reduce demand for assets like Bitcoin and technology stocks, but the potential for monetary easing by the Fed to combat the recession and , the resulting decline in the dollar index (the value of the US dollar relative to other major currencies) could end up being bullish for Bitcoin, as it was during the 2020 coronavirus recession.

Despite all the calls for the curve to un-invert through rising long-end yields, looks like the un-inversion is coming through a bull steepener, as it almost always does. Once again, this cycle may not be as different as commonly perceived . pic.twitter.com/p1dqkFtjE9

— The Spread Thread (@SpreadThread1) January 12, 2024

The vertical gray line in the graph in the post represents the US recession.

｜Translation: CoinDesk JAPAN
｜Edited by: Toshihiko Inoue
｜Image: Shutterstock
｜Original text: Bitcoin’s Safe Haven Appeal Could Be Tested Soon, US Bond Market Suggests