I half suspect that I've ran into an alpha for detecting macro Bitcoin prices trend.
I don't mind spilling it in case it pans out, as a reward for you finding your way here. But first you have to suffer my explanations below, mostly done for my own entertainment.
The first thing to understand is the US treasury bond market. I'm no expert on it, never bought one. But from what I'm told it's a market that's free of corruption and manipulation. Apparently there isn't a lot of such markets around, therefore whatever signal it sends is worth paying attention to.
The next thing to understand is treasury bond comes in different durations. There is 2-year bond, 5-year, 10-year etc.
A 2-year bond means by the end of two years, you get your money back along with the promised amount of interests. Ditto for 10-year bond.
Thing is 2-year and 10-year bonds would promise you different rewards (in the form of interest rate). It would make sense that you demand higher reward if you're lending your money for ten years and not able to use them in that span of time.
Here's the grand entrace: there is something interesting found in the gap/differences between these two interests rates. The yield curve is the tracking of the differences between these two rates over time.
The larger the gap, the more telling it is.
What I personally keep track of is the yield curve 2yr vs 10yr bonds.
Essentially the more yield curve goes up, the more the market isn't happy holding bonds.
This creates excuse for institutional dollars to flow elsewhere, be it commodities, stocks or precious metals. Since the past one year Bitcoin has graduated into a legitimate place to park money.
Personal take: it matters to emphasize this is a study of institutional money flow, not retail. I could be way off about this but if I am, I think the consequence wouldn't differ too much.
Back to yield curve. Based on my chart-read, Bitcoin pumps (big or small) since 2016 has coincided with yield curve upswing after the fact. In fact yield curve front-ran Bitcoin rallies by about 2-3 months. That gives me an indicator that's leading by at least two months.
That gives us buy-signals. Sell-signals however can't be found, which sucks. I was hopeful to use this for spotting the top but I can't find anything hint strong enough.
Which brings us the market today. Bitcoin is at ~$40k. The question is are we at the top.
It's a totally legit question. It only felt like yesterday that $20k was broken after a slump of three years. It's fair to expect it to come back down from $40k.
But that's not what the yield curve is telling me. It's been trending up sharply the last week. The real Bitcoin price pump remains ahead, that's what it's indicating.
Which puts me in a peculiar position. I can't sell, yet I can't add more BTC into my position because my portfolio is already overweight with it.
This has me sitting my hands. I'm better writing than making trades.