Real Interest Rates Provide a Headwind for Bitcoin
ByteFolio Issue 216;
Bitcoin’s ByteTrend Score remains a 0. The price has made a new low, and there is no way to sugarcoat this in the short term.
Bitcoin Daily
With the price below the 200-week moving average, the weekly score drops to a 1. The long-term trend remains strong, and this condition marked the turning point in 2022.
Bitcoin Weekly
Since the 2017 peak, Bitcoin has maintained a 42% IRR using a regression, which is high compared to other asset classes (The Magnificent 7 big tech stocks delivered 27% on this basis). The price is 1.5 deviations below the trend.
Post-2017 Regression
It could simply be that Bitcoin has done well this cycle and that it is a period of cooling off. To demonstrate that, the Bitcoin network is alive and well. Last week, I showed record transaction volumes, and now, I show transaction values across the blockchain. Last week, we saw $13.5 billion of on-chain transactions, which is 5x the level of 2022. The underlying network remains in good shape.
Network Transaction Value in USD
Trading volumes are much higher, with CoinMarketCap reporting $35 billion per day. That is high compared to other heavily traded stocks, and equivalent to NVIDIA and higher than Tesla.
That said, investors are selling Bitcoin and, for that matter, gold as well. Last October, investors held 1,500,800 BTC, which has now fallen to 1,352,400 BTC.
BTC Held by ETFs
In dollar terms, we have seen this kind of selling twice before. In early 2025, it soon reversed. Since October, the rallies have been more muted.
BTC ETF Fund Flows in USD
Europe continues to accumulate, against the tide, mainly from the UK.
European Bitcoin Holdings
The malaise comes from the macro. Real yields, i.e. the bond yield less inflation expectations, are rising. This condition was seen in 2018, when Bitcoin fell 73.8%, and in 2022, when it fell by 64.3%.
Real Rates Provide a Headwind for Bitcoin
The current Bitcoin bear is long in the tooth, and the best news I can deliver is that real rates won’t rise forever. Sooner or later, they’ll turn. If they don’t, it won’t just be Bitcoin that feels the pinch.
