tl;dr
Crypto proponents have long seen bitcoin as a hedge against economic and political turmoil, and this may soon be put to the test as the U.S. Treasury market is normalizing through a process called “bull steepener,” historically preceding economic recessions. The U.S. Treasury yield curve, normally u...
Crypto proponents have long seen bitcoin as a hedge against economic and political turmoil, and this may soon be put to the test as the U.S. Treasury market is normalizing through a process called “bull steepener,” historically preceding economic recessions.
The U.S. Treasury yield curve, normally upward-sloping, inverted in mid-2022, and bull steepening has caused the two-year yield to fall more than the ten-year yield. Historically, bull steepeners have been followed by recessions, and a potential recession could lead to less demand for assets like bitcoin and technology stocks. However, monetary easing by the Federal Reserve could eventually prove bullish for bitcoin, as it did during the coronavirus-induced recession of 2020.
Crypto propounders have long-hailed bitcoin (BTC) as a haven asset or a hedge against economic and political turmoil and fiat currency malaise.
The hedging properties could be put to the test soon as the U.S. Treasury market is normalizing through a process called “bull steepener,” which has historically preceded economic recessions, a period of sustained weakness in economic output and joblessness.
The U.S. Treasury yield curve plots the yields of different government bond maturities. The curve is normally upward-sloping, with longer-duration bonds offering higher yields than shorter-duration bonds. In mid-2022, the curve inverted, with the two-year yield rising above the 10-year yield. The spread between the 10- and two-year yields dropped as low as -100 basis points in July 2023 before beginning the recovery, often called de-inversion or normalization.
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