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Bitcoin on Wednesday significantly reduced the divergence of the dynamics of quotations with the rate of ten-year US bonds. Over the past two years, both assets have established a high correlation that arose with the onset of the 2020 crisis.
The foundation of the relationship between the growth of the yield of American Treasuries (US10Y) and Bitcoin was the same reaction to the growth of inflation, which is hindered by the FRS policy.
The chart above shows two divergence areas in November last year and January this year, associated with a sharp negative reaction from BTC to Jerome Powell’s statements. At these moments, the head of the Fed promised to accelerate the reduction of the stimulus program and the increase in the rate.
After these words, Bitcoin fell following the stock market shares, with which the asset also had a high correlation at the level of 64%. According to the IMF’s statistical observations, it manifests itself especially strongly during periods of falling stock indices.
According to yesterday’s data, US inflation has broken another record of 7%, but fell within the framework of the Fed’s forecasts. This coincidence allowed the stock market shares to maintain a positive trend that emerged on other news of the day.
The Fed hopes to see a slowdown in consumer price growth from next month and beyond during the year. In this case, Bitcoin and US10Y will copy the dynamics of November last year, highlighted in the chart with a yellow marker.
Bond yields will fall for the rest of the year, while Bitcoin will only rise until a certain point, then turn around and retest recent lows. This scenario can only be avoided if the stock market grows, which is also likely to fall due to the Fed’s plans to increase the rate.
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