Bitcoin bullish trend anticipated as the US encounters ‘bear steepener’ — Arthur Hayes

A new forecast suggests that the United States government could play a significant role in Bitcoin (BTC) transitioning into a full bull market.

In an X thread dated Oct. 4, Arthur Hayes, the former CEO of the crypto exchange BitMEX, pointed to rising yields as a precursor to a renewed Bitcoin and crypto bull market.

Hayes: Bitcoin enthusiasts should watch for U.S. “no way out” moment

U.S. treasury yields are “soaring,” and Hayes believes that a macroeconomic turning point is imminent.

This situation is attributed to a phenomenon known as a “bear steepener,” which refers to long-term interest rates increasing at a faster pace than short-term rates.

“Why do I find these markets appealing right now with yields on the rise? Bank models are not equipped to handle a bear steepener,” he stated.

Considering the current sharp increase in the 2s30s curve — the disparity between the 30-year and 2-year yields — along with the uptick in both long and short-term interest rates, economic pressure is mounting.

“Due to the leverage and non-linear risks present in banks’ portfolios, they will be compelled to sell bonds or pay fixed on IRS as rates climb. Increased selling leads to more selling, which is detrimental for bond prices,” Hayes elaborated.

The outcome should be evident — a return to substantial liquidity injections, counterbalancing the quantitative tightening that has been in effect since late 2021, which has impacted crypto markets.

For Hayes, this process will not occur without significant repercussions. He concluded:

“The quicker this bear steepener escalates, the sooner someone will face failure, the sooner everyone will realize there is no alternative to money printing to rescue government bond markets, the sooner we return to the crypto bull market :). The Lord is my Shepherd, I shall not want.”

U.S. 30-year bonds yield 1-month chart. Source: TradingView

Additional data from TradingView indicates that the yield on 30-year U.S. government bonds reached 5% this week — the first occurrence since August 2007, prior to the Global Financial Crisis.

Continuing the conversation, Philip Swift, the creator of the statistics platform LookIntoBitcoin and co-founder of the trading suite Decentrader, expressed his agreement with Hayes’ assessment.

An accompanying chart illustrated Bitcoin’s correlation with treasury yields.

“That would be THE primary catalyst for the Bitcoin bull market,” he remarked regarding a potential return to money supply growth.

Treasury yields vs. BTC/USD annotated chart. Source: Philip Swift/X

U.S. debt experiences its own “Uptober”

Meanwhile, the U.S. continues to accumulate its record-high national debt at an extraordinary rate.

Related: Bitcoin analysts still predict a BTC price crash to $20K

Two weeks after the national debt surpassed $33 trillion for the first time, the government increased its total by $275 billion in just one day.

This development did not go unnoticed by financial commentators.

Total US debt just rose $275 billion in one day—the same amount as last month’s total borrowing.
Yet —
• Unskilled military-aged foreign men are invading
• Violent criminals caught & released
• Open-air drug use
• American culture in shambles
The US doesn't work for you. pic.twitter.com/03YUxyiQtB

— Joe Consorti ⚡ (@JoeConsorti) October 3, 2023

“In a single day, the US added more than half of Bitcoin’s entire market cap in debt,” responded Samson Mow, CEO of Bitcoin adoption firm Jan3.

“That’s something like 10 million BTC. And yet there are still people that are unsure if $27k is a good price to buy.”

BTC/USD 1-hour chart. Source: TradingView

BTC/USD was trading at approximately $27,500 at the time of this report.

This article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own research before making any choices.