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Bitcoin Outperforms U.S. Long Bond ETF Amid Market Volatility

Bitcoin (BTC), the leading cryptocurrency by market capitalization, has shown a remarkable strength against the U.S. long bond exchange-traded fund (TLT), which tracks the performance of the 20+ Year Treasury Bond Index.

According to Glassnode, a blockchain analytics platform, a trend emerged between Bitcoin and TLT in early December as BTC denominated in TLT hit a triple top level previously seen in 2021.

Bitcoin just rallied above $44,200 and is 36% off its all-time high of $69,000, which it reached in November 2021. Meanwhile, TLT is currently trading around $94 and stands 48% off its peak of $179, which it reached in March 2020 amid the COVID-19 pandemic.

BTC Price Drawdown from ATH | Source: Glassnode

This divergence is further highlighted as it currently requires 471 TLT to purchase one Bitcoin, surpassing previous highs of approximately 420 and 440 in March and November 2021, respectively, when Bitcoin was trading well above $50,000.

This trend suggests an interesting aspect of the financial markets, as Bitcoin, traditionally viewed as a risky asset, displays resilience compared to TLT, a global benchmark for relatively safe assets. Bitcoin’s volatility has been decreasing over time, while its adoption and innovation have been increasing, making it more attractive for investors seeking higher returns and lower risks.

BTCUSD/TLT & TLT Drawdown | Source: Trading View

Notably, Bitcoin exchange-traded funds (ETFs) are experiencing substantial inflows, potentially offering tailwinds to Bitcoin’s price. According to Bloomberg, the combined assets under management of the four U.S.-listed Bitcoin futures ETFs have surpassed $2 billion in less than three months since their launch. Moreover, several Bitcoin spot ETFs are awaiting approval from the U.S. Securities and Exchange Commission (SEC), which could further boost the demand and liquidity for Bitcoin.

Contrarily, market forecasts may dampen TLT’s prospects, as the expectations of higher inflation and interest rates weigh on the bond prices. The CME FedWatch Tool, which tracks the probability of future Fed rate moves based on the Fed Funds futures contracts, is currently projecting an 82% chance of a pause by March 2024, contrary to the optimism that prompted TLT to rally in recent weeks.

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