The U.S. Treasury market may be a precursor to a significant market event, directly affecting both the Bitcoin and conventional investment markets, according to recent research from Bank of America (BAC). U.S. Treasury bonds currently trade at a large discount to their 200-day simple moving average and appear oversold, while rates are at multi-year highs.
Historically, significant volatility slumps in all global financial sectors, including cryptocurrencies, have preceded such oversold conditions in Treasury notes. The October 1987 crash, the Tequila crisis in May 1994, the internet bubble in June 1999, and the Bitcoin and Nasdaq busts in March and October 2021, respectively, were all notable market turbulence that followed oversold Treasury securities.
Because it has an impact on the state of the global liquidity market, the U.S. Treasury market is closely watched by traders worldwide. Over the past 18 months, it has become clear that rising rates and declining bond prices can stifle investment in other risky assets.
Similar to the early 2021 reading, which was followed by Bitcoin setting new record highs above $60,000 before seeing a significant collapse below $30,000 by the end of May 2021, the current oversold reading is reminiscent of that reading. This may portend future price volatility across more markets, including Bitcoin. Bitcoin is currently sold for roughly $27,950.