High Yield Credit: Bitcoin Cycles

High Yield Credit: Bitcoin Cycles

As well as being influenced by participant activity within its own ecosystem, Bitcoin price is also influenced by liquidity, credit, and sentiment in global markets.

High yield credit rates can be seen as a reflection of investor sentiment towards the global economy.

• When investors are optimistic about the economy, they are more willing to take on risk and invest in high yield bonds.
• Conversely, when investors are pessimistic about the economy, they are less willing to take on risk and demand for high yield bonds falls.

High yield credit refers to corporate bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds. High yield bonds are more risky and prone to default, but they can offer higher returns and diversification benefits for an investor.

The relationship between this and Bitcoin’s cycles is observable on the chart. There is a strong correlation between Bitcoin's price cycles and the shifts in global High Yield Credit. When global risk appetite has been strong this has historically coincided with bullish periods for Bitcoin price.

In a globally connected world it is conceivable that Bitcoin's price is influenced by external forces like High Yield Credit as well as internal ones such as Bitcoin's halving dates. The colors overlaid on top of the High Yield Credit data show each Epoch between Halving events:

circle First Epoch

circle Second Epoch

circle Third Epoch

circle Fourth Epoch

circle Fifth Epoch

Note that the Bitcoin halving dates are independent of High Yield Credit data. They are overlaid on top of each other to highlight that both internal and external factors are at play.

The original view of this chart was put forward by @TXMCtrades. We have adapted the original by using High Yield Credit percentage ranking across the entire dataset and not splitting by each epoch.

As Bitcoin continues to be adopted over time it remains to be seen whether this relationship with High Yield Credit will remain or whether the correlation will fade due to evolving user demand towards Bitcoin.

A similarly powerful Macro connection with Bitcoin performance is shown by the Manufacturing PMI: Bitcoin Cycles chart which outlines confidence in the broad economy among purchasing managers. Its strong correlation provides actionable insight for Bitcoin when used alongside this High Yield Credit chart.