Fidelity's latest research data shows that Bitcoin's correlation with U.S. Treasury yields has broken above 0.6, hitting a record high; over the same period, U.S. federal debt has topped $40 trillion. On the macroeconomic policy front, Barclays also raised its expectations for the Fed's policy path, believing the Fed may raise rates by 25 basis points each in December and January next year. U.S. Treasury yields, federal debt levels, and the rate path are becoming macro variables with clearly rising weight in crypto market pricing.
Fidelity Data: Bitcoin's Correlation with U.S. Treasury Yields Breaks Above 0.6
Fidelity research shows that the correlation between Bitcoin and U.S. Treasury yields has broken above 0.6, hitting a record high. A correlation indicator measures the degree to which the prices of two assets move in the same direction; the higher the reading, the more likely the two are to be driven by the same set of macro factors. The correlation breaking above 0.6 and setting a new high shows that Bitcoin's price moves have become markedly more linked with U.S. Treasuries, a globally core pricing asset, and its drivers are no longer limited to capital and sentiment within the crypto market. According to Fidelity, this change further reinforces the macro narrative of Bitcoin as a hedge against sovereign debt risk.
Federal Debt Topping $40 Trillion Forms the Narrative Backdrop
Appearing alongside the correlation data was the breach in U.S. federal debt levels. Fidelity noted that U.S. federal debt has topped $40 trillion. The continued expansion of sovereign debt is an important backdrop for market discussions of the logic of Bitcoin as a hedge against sovereign debt risk. Observing both pieces of information within the same framework—the record-high correlation between Bitcoin and U.S. Treasury yields and U.S. federal debt topping $40 trillion—shows that the focus of institutional attention is on the possible pricing link between sovereign credit conditions and crypto assets, rather than short-term price fluctuations.
Policy Variable: Barclays Expects 25 Basis Point Hikes in Both December and January Next Year
On the rate path, Barclays raised its rate hike expectations, believing the Fed may raise rates by 25 basis points each in December and January next year. Changes in Fed rate hike expectations directly affect the pricing basis for global risk assets. If both hikes materialize, it would mean monetary policy tightens consecutively within a relatively short period, with risk-free rates rising and financial conditions tightening, and both the valuations and liquidity of risk assets would be affected. The material explicitly notes that consecutive hikes in December and January next year would pressure crypto market liquidity.
Transmission Path: From Rate Hike Expectations to Crypto Market Liquidity
The Fed's policy path typically transmits to risk assets through risk-free rates and liquidity conditions. When rate hike expectations heat up, funding costs rise, the market's tolerance for highly volatile assets declines, and tightening liquidity often shows up in pricing before actual rate changes. As a highly volatile asset class, the crypto market is relatively sensitive to changes in liquidity conditions. In this transmission chain, rate hike expectations, U.S. Treasury yield trends, and liquidity conditions constitute key variables for observing the crypto market's external environment.
Compounding Effect: Rising Correlation and Tightening Liquidity Appear Together
There are two parallel threads in the current macro environment. On one hand, Bitcoin's correlation with U.S. Treasury yields breaking above 0.6 means changes in U.S. Treasury yields and the rate path may transmit to Bitcoin's price more efficiently than in the past, and the weight of macro data and Fed meeting outcomes on crypto assets is rising; on the other hand, expectations of consecutive rate hikes point to tighter liquidity, and liquidity is one of the important supporting conditions for crypto market valuations. A rising correlation itself does not point to a one-way move up or down, but it indicates that Bitcoin's pricing is becoming more deeply embedded in the macro rate framework, and the linkage between macro variables and the crypto market is worth continued tracking.
Institutional View: Crypto Assets Are Being Incorporated into Macro Analysis Frameworks
From Fidelity's correlation data to Barclays' rate expectations, crypto assets in institutional research are already being observed within the macro framework of U.S. Treasuries and the rate path. For market participants, variables that need tracking have expanded from on-chain data and project developments to U.S. Treasury yield trends, federal debt levels, and the outcomes of Federal Reserve policy meetings. This change in the observation framework itself also reflects that the position of crypto assets in mainstream institutional analysis systems is changing.
What to Watch Next
Variables worth tracking going forward include: the actual decisions at the Fed's December and January next year policy meetings, the next move in U.S. Treasury yields, further changes in U.S. federal debt levels, and whether Bitcoin's correlation with U.S. Treasury yields can remain above 0.6. The combination of these variables will determine the path and strength of transmission from the macro environment to the crypto market.
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