Bitcoin fell 13% in five weeks even as the 10-year Treasury yield fell

Bitcoin (BTC) closed at $73,302.84 on November 10, 13.2% below its $84,478.54 close on October 2 (computed), according to daily closes published by the St. Louis Fed. Over the same five weeks the 10-year Treasury yield fell to 4.98% from 5.28%, the US Treasury's daily par yield curve shows. A move in long-term yields does not account for the decline.

Yields fell in five of six weeks while bitcoin fell in all six

The comparison uses Friday closes, plus Tuesday, November 10, the latest Treasury figure available. On Friday, September 25, bitcoin closed at $84,048.07 and the 10-year yield was 5.17%. A week later, on October 2, they stood at $84,478.54 and 5.28%, the highest yield in the period.

The run-up to that level was steep. Bitcoin closed at $80,844.00 on September 18 and gained 4.0% (computed) in the week to September 25, while the 10-year yield rose to 5.17% from 5.01%, an increase of 0.16 percentage point (computed). In that week the two series rose together; the pattern did not last into October.

From there bitcoin fell week after week: $82,543.30 on October 9 (down 2.3%, computed), $81,475.05 on October 16 (down 1.3%), $81,026.70 on October 23 (down 0.6%), $77,191.25 on October 30 (down 4.7%) and $75,860.14 on November 6 (down 1.7%). The 10-year yield over those Fridays read 5.24%, 5.09%, 5.00%, 4.94% and 4.86%, a fall every week.

The two series moved in the same direction only in the latest leg. Between November 6 and November 10, bitcoin lost another 3.4% (computed) as the 10-year yield rose 0.12 percentage point to 4.98%, computed from the Treasury's 4.86% and 4.98% readings. FRED's series shows a further close of $70,822.24 on November 12, 18.1% below the $86,423.68 peak of October 4 (computed).

The short end rose while the long end fell

The Treasury's curve did not fall evenly. The 3-month bill yield rose to 4.30% on November 10 from 4.19% on October 2. The 2-year yield eased to 4.73% from 4.83%, and the 10-year yield fell 0.30 percentage point. The 2-year yield, which tracks expectations for the policy rate more closely, fell to 4.51% on November 6 from 4.83% on October 2, a decline of 0.32 percentage point (computed), then jumped to 4.73% on November 10, a rise of 0.22 percentage point (computed) in two trading days. Over the same days bitcoin lost 3.4% (computed), a coincidence in timing that the data cannot interpret. The gap between the 10-year and the 3-month yield narrowed to 0.68 percentage point from 1.09 (computed).

The Federal Reserve's policy rate moved up in the same months. The effective federal funds rate, as a monthly average, was 3.63% in August, 3.75% in September and 3.88% in October, according to FRED's series. Higher short-term rates alongside lower long-term yields describe a flatter curve, which markets often read as a sign that investors expect slower growth. The data used here do not say what investors expect, and none of these series measures it.

What the numbers rule out, and what they leave open

Two simple explanations fail the test of the weekly record. Bitcoin did not fall because long-term yields rose, since they fell in five of the six weeks it declined. It also did not track the 3-month bill: that yield rose by 0.11 percentage point (computed) over the period, but the data show no week-by-week match with bitcoin's declines.

Other explanations, such as leverage in derivatives markets, the supply of dollars or events at individual companies, are outside these data, and this comparison cannot show whether any of them was a cause. We do not claim one. The daily closes are Coinbase's, republished by the St. Louis Fed, and other venues may have closed at slightly different prices.

The window is also short. Six weekly observations cannot establish a relationship between two series in either direction, and the weekly changes of both are small relative to the day-to-day moves each series makes. What the record does support is narrower: over this period the two prices were not linked in the way the common shorthand ("bitcoin trades on rates") suggests.

Rates are a weaker guide than they look

We think this record is a reason to be careful with single-cause explanations of crypto prices. A reader who watched only the 10-year yield would have expected bitcoin to rise in October; it did the opposite. Our view is that leverage, the supply of dollars and company-specific events deserve at least as much weight as the benchmark yield, and that the 3-month rate, which is rising with the policy rate, deserves a closer look than the 10-year.

The threat is a continued decline that is unrelated to rates, which a rate-based reading would miss. The opportunity is that a market unmoored from yields is also less exposed to a reversal in them if the Fed's path changes. We do not forecast price levels for bitcoin or any token and do not do so here. We would revisit this view if bitcoin and the 10-year yield move together over several consecutive weeks, and we would test it again once the Treasury publishes its November 12 and later figures.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.