Fidelity Digital Assets says the correlation between Bitcoin’s market capitalisation and the 10-year real Treasury rate has climbed above 0.6, a record, with the firm attributing the shift to pressure on US public finances. Federal debt has passed $40 trillion and interest payments have overtaken Medicare to become the second-largest item in the federal budget. The thesis had a live test this week, and it did not hold.
Bitcoin Fell Whichever Way Yields Went
On Thursday the 10-year Treasury yield dropped 13.6 basis points, with 20- and 30-year yields falling more than 14, and Bitcoin fell. A positive correlation predicts exactly that.
On Friday yields rose to 5.097% and Bitcoin fell again. A positive correlation predicts a rise.
One match out of two is not a 0.6 relationship, and the failure is instructive rather than random. What took over this week was AI infrastructure credit stress — Goldman Sachs measured AI-related high-yield spreads widening 25 basis points while non-AI spreads barely moved, and semiconductors shed roughly $2 trillion across an eight-session losing streak.
That is the vulnerability in any correlation built on a shared driver. When a different force sets the direction, the relationship stops describing anything.Why a Positive Correlation Is Counterintuitive
Higher real rates normally hurt assets that generate no income, because the opportunity cost of holding them rises. Gold demonstrated the mechanism this week, falling about 1% on Wednesday’s hot CPI print.
Fidelity’s argument is not that higher rates help Bitcoin. It is that both respond to the same cause: fiscal deterioration pushes yields up through debt supply and pushes Bitcoin up through demand for a hedge against currency debasement.
Chris Kuiper, the firm’s VP of Research, linked rising yields and Bitcoin’s gains to investor sentiment about deficits and debt, pointing to the 21 million supply cap and its fixed issuance schedule.That is a coherent story. It is also a shared-driver correlation rather than a causal link, th$BTC
$XAU
Bitcoin Fell Whichever Way Yields Went
On Thursday the 10-year Treasury yield dropped 13.6 basis points, with 20- and 30-year yields falling more than 14, and Bitcoin fell. A positive correlation predicts exactly that.
On Friday yields rose to 5.097% and Bitcoin fell again. A positive correlation predicts a rise.
One match out of two is not a 0.6 relationship, and the failure is instructive rather than random. What took over this week was AI infrastructure credit stress — Goldman Sachs measured AI-related high-yield spreads widening 25 basis points while non-AI spreads barely moved, and semiconductors shed roughly $2 trillion across an eight-session losing streak.
That is the vulnerability in any correlation built on a shared driver. When a different force sets the direction, the relationship stops describing anything.Why a Positive Correlation Is Counterintuitive
Higher real rates normally hurt assets that generate no income, because the opportunity cost of holding them rises. Gold demonstrated the mechanism this week, falling about 1% on Wednesday’s hot CPI print.
Fidelity’s argument is not that higher rates help Bitcoin. It is that both respond to the same cause: fiscal deterioration pushes yields up through debt supply and pushes Bitcoin up through demand for a hedge against currency debasement.
Chris Kuiper, the firm’s VP of Research, linked rising yields and Bitcoin’s gains to investor sentiment about deficits and debt, pointing to the 21 million supply cap and its fixed issuance schedule.That is a coherent story. It is also a shared-driver correlation rather than a causal link, th$BTC
$XAU