Comparing Bitcoin To US 10-year Treasury Shows Its Use Case As Hedging Asset
Bitcoin has been making its case an uncorrelated, safe-haven asset. Bitcoin’s store-of-value characteristics that are similar to real assets like gold, as well as hard-money attributes like immutable scarcity.
New data shows that Bitcoin closely tracks inverted US 10-year Treasury (UST10Y) performance. This increases its hedging use case manifolds.
Stock Board Asset founder and CEO, Alastair Williamson notes:
probably one of the most interesting charts out there: Bitcoin vs. UST10Y inverted pic.twitter.com/qEuFqD6JJ9
— Alastair Williamson (@StockBoardAsset) June 21, 2019
However, this data is only of the last 6 months.
The 10-year Treasury note yield soared 6.5 basis points to 2.066%, trimming the benchmark rate’s weekly decline to 2.6 basis points. It staged its biggest daily yield increase since April 1, a day after falling below the 2% level to a two and half year low.
Bitcoin As A Safe Haven
Grayscale’s industry-famous research department recently released a report titled “Hedging Global Liquidity Risk with Bitcoin”. In it, the firm explained how the leading cryptocurrency is becoming used as a hedge in financial crises and periods of geopolitical turmoil. They looked into how the asset can be used during bouts in which there is high liquidity risk, the risk of a real decline in wealth resulting from an imbalance in the amount of money and credit relative to debt in a given economy.
While it is still very early in Bitcoin’s life cycle as an investable asset, there is proof supporting the assumption that it can serve as a hedge in a global liquidity crisis, particularly those that result in subsequent currency devaluations.
We can see this everywhere in the world where there is an economic turmoil, namely Venezuela, Iran, and more recently Hong Kong. Protests against a controversial extradition law resulted in Bitcoin trading at a premium in Hong Kong. BTC has been trading between $75 and $160 over the global average on local exchange Tidebit, with many experts believing an even bigger premium will follow.