 | Over the past 2.5 years, whenever US10Y has moved substantially lower, bitcoin and gold have moved substantially higher [chart 1]. And US10Y could be in the process of making a move lower - breaking a well-established four year trend channel to the downside [chart 2 and 3]. Why are falling Treasury yields good for liquidity-sensitive assets like bitcoin and gold? Because collateral values (Treasury values) are an important component to liquidity growth. Lower Treasury yields = higher collateral values = more leverage for banks = rising liquidity. Look at how US10Y (inverted) is highly correlated to Global Monetary Liquidity [chart 4]. This shows that falling yields coincide with rising liquidity, and rising yields coincide with falling liquidity. Watch the US10Y chart closely - it just might be in the process of breaking what I have dubbed "the most important line in markets". A good CPI print today might be the trigger. [link] [comments] |
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