Bitcoin And Crypto Alert: The Implications Of Bill Ackman’s 30-Year T-Bills Short
04 August 2023 - 8:35PM
NEWSBTC
What does this mean for Bitcoin and the broader crypto market? In a
surprising move that has sent ripples through the financial world,
billionaire hedge fund manager Bill Ackman recently announced that
he is shorting 30-year Treasury bills. Ackman predicts that yields
could soon skyrocket to 5.5%, a move he is positioning as a hedge
against the impact of long-term rates on stocks in a world he
believes will be characterized by persistent 3% inflation. “I have
been surprised how low US long-term rates have remained in light of
structural changes that are likely to lead to higher levels of
long-term inflation,” Ackman wrote on Twitter. He cited factors
such as de-globalization, higher defense costs, the energy
transition, growing entitlements, and the greater bargaining power
of workers as potential drivers of this inflation. Ackman also
pointed to the overbought nature of long-term Treasurys and the
increasing supply of these securities due to the U.S.’s $32
trillion debt and large deficits. “When you couple new issuance
with QT, it is hard to imagine how the market absorbs such a large
increase in supply without materially higher rates,” he added.
Remarkably, the 30 year yield climbed to 4.28% yesterday. However,
not everyone agrees with Ackman’s perspective. Ram Ahluwalia, CEO
of Lumida Wealth, suggested that Ackman’s views might already be
priced into the market. “When someone has an idea, especially a
hedge fund manager, it’s good mental habit to assume the idea is
Consensus,” Ahluwalia wrote on Twitter. He even suggested taking
the opposite view, advocating for buying 10-year bonds in the 4.1
to 4.25% range and mortgage bonds at 6.5 to 7%. Related Reading:
Bitcoin Breakout Or Breakdown? Ark Invest’s David Puell Shares His
Prediction Meanwhile, Lisa Abramowicz, a Bloomberg analyst, noted
that the U.S. Treasury selloff has been driven by long-dated notes,
not those most sensitive to Fed policy. “This suggests two things:
traders expect inflation to stay higher for longer and they
question whether the Fed is truly going to raise rates high enough
to achieve 2% inflation,” she said. Implications For Bitcoin And
The Crypto Market? Since the opinions are divergent and, moreover,
Bitcoin and bond yields are linked in several ways, there are
several potential scenarios. Scenario 1: Yields Rise Significantly
If Bill Ackman’s prediction comes true and the yield on 30-year
Treasury bills rises significantly to around 5.5%, this could have
several implications for Bitcoin. Increased Risk Appetite: Higher
bond yields could indicate a greater risk appetite among investors.
If investors are willing to accept higher risk for higher returns,
they might also be more inclined to invest in Bitcoin, which is
often seen as a riskier asset. This could potentially drive up the
price of Bitcoin. Inflation Hedge: If the rise in bond yields is
driven by increased inflation expectations, Bitcoin could attract
more investment as a potential store of value. Bitcoin, often
referred to as ‘digital gold’, has been seen by some investors as a
hedge against inflation. If inflation continues to rise and erodes
the value of fiat currencies, more investors might turn to Bitcoin,
pushing its price higher. However, that’s a narrative that still
needs to be proven over time. Furthermore, it’s important to note
that if yields rise too quickly or too high, it could lead to a
sell-off in risk assets, including Bitcoin, as investors move to
safer assets. This could potentially put downward pressure on
Bitcoin’s price. Scenario 2: Yields Remain Stable Or Fall If,
contrary to Ackman’s prediction, yields remain stable or fall, this
could also impact Bitcoin. Risk Aversion: Lower yields could
suggest that investors are moving towards safer assets, which could
negatively impact Bitcoin prices. If investors are less willing to
take on risk, they might move away from Bitcoin towards safer
assets like bonds. Related Reading: DOJ Action Against Binance: A
Hidden Blessing For Bitcoin And Crypto Markets? Liquidity
Conditions: Bond yields can reflect liquidity conditions in the
market. If yields fall, it could suggest that liquidity is high. In
such a scenario, there could be more capital available for
investment in assets like Bitcoin, potentially supporting its
price. Scenario 3: Market Uncertainty Increases If market
uncertainty increases, for example due to concerns about U.S.
fiscal policy or rapid repricing in the bond market, Bitcoin could
potentially serve as a hedge. Hedge Against Uncertainty: In times
of market uncertainty, like in the banking crisis in March, some
investors might turn to Bitcoin as a potential hedge. If Bitcoin’s
perceived status as a ‘digital gold’ or safe haven asset
strengthens, this could potentially attract more investment and
drive up its price. However, it’s important to note that Bitcoin’s
reaction to market uncertainty can be unpredictable and can depend
on a variety of factors, including investor sentiment and broader
market conditions. In conclusion, the potential impact of bond
yield movements on Bitcoin’s price is complex and can depend on a
variety of factors. Investors should remain vigilant and consider a
range of potential scenarios. Otherwise, Bitcoin and crypto
intrinsic factors like the approval of a Bitcoin spot ETF, a Ether
futures ETF or any actions by the US Department of Justice (DOJ)
against Binance, among others, have the potential to cause an
increased volatility. Featured image from CNBC, chart from
TradingView.com
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