US Treasury yield rises while Gold takes a hit after weak US data; Could Bitcoin price suffer too?
- The benchmark 10-year US Treasury Bond yield continued its recovery on Tuesday, rising by nearly 8% in the last eight days.
- Gold, on the other hand, fell below $1,950, testing the 100-day EMA as support.
- Bitcoin price currently shares a negative correlation with the precious metal, giving it room to stay afloat during difficult market conditions.
Bitcoin price has shared a positive correlation for a long time with one of the most important investment vehicles in the world - Gold. But over the past couple of weeks, this position changed, and with the economy growing weaker, the precious metal seems to be taking a hit, which is playing in favor of the cryptocurrency.
Weak US data may not impact Bitcoin price too much
As the US manufacturing and labor market data missed estimates, the market exhibited an interesting development. In the wake of the weak economy, The benchmark 10-year US Treasury bond yield observed an increase and is currently above 4%, hitting a four-week high.
On the other hand, Gold price took a hit and declined on Tuesday, losing the support of the $1,950 mark. Trading at $1,944 at the time of writing, XAU is testing the crucial 100-day Exponential Moving Average (EMA). Here lies the conundrum which has the crypto market confused.
Bitcoin, Gold and US 10-year Treasury bond yields
Bitcoin has long been compared to the precious metal and is also called digital Gold for being a risk-averse asset. Up until a while ago, the cryptocurrency even shared a positive correlation with XAU. However, declining since the high of April of 0.91, the correlation now stands at a negative of -0.55.
This negative correlation is what shielded Bitcoin price on Tuesday from observing an excessive drawdown even though BTC fell by 1% to trade below $29,000. Going forward, this situation is only expected to get worse as the weak data is seemingly a preview of potential rate hikes.
Bitcoin correlation with Gold
Author and analyst Peter Schiff shared a similar opinion as he stated,
“The Treasury bond market is shrugging off weaker than expected economic and labor market data, with yields moving sharply higher anyway. This is a sign that higher long-term #inflation expectations, not stronger economic growth or Fed rate hikes may now be the operative concern.
The Federal Reserve was already holding out the possibility of two more rate hikes since June, one of which came to fruition in July when the interest rate increased by 25 basis points. The target range now stands at 5.25% - 5.50%. During the recent meeting, too, most members of the Federal Open Market Committee (FOMC) were of the opinion that 2023 might require more rate hikes.
This may lead to some tough times for Bitcoin prices as interest rate hikes would lead to a decrease in demand for high-risk assets, including cryptocurrencies. As is, the crypto market has been struggling to recover for a while now, and the decline below $29,000 might trigger a correction to $25,205.
Read more about potential Bitcoin targets here - Bitcoin Weekly Forecast: Can XRP’s win take BTC to $40,000?
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Author
Aaryamann Shrivastava
FXStreet
Aaryamann Shrivastava is a Cryptocurrency journalist and market analyst with over 1,000 articles under his name. Graduated with an Honours in Journalism, he has been part of the crypto industry for more than a year now.
