A report A recent report by Pantera Capital said that movements in the debt market and changes in the US Federal Reserve’s (Fed) monetary policy could be the main factors driving Bitcoin’s next rally.

The performance of the stock and crypto markets has been in the investor spotlight in recent years as trillions of dollars have been printed since the Covid-19 pandemic, prompting them to set new all-time highs (ATHs), but analysts are now warning everyone against alarming signs from the debt markets.

Despite interest rates being kept at record lows, cracks in the system continue to widen as US Treasury yields are “rising significantly,” according to market analyst Dylan LeClair.

While equities are getting all the attention, fixed income is the real driving force around the world.

Yields have risen dramatically since November – bond investors have begun to realize that with inflation at 40-year highs they are sitting in contracts programmed for a fall in purchasing power

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— Dylan LeClair ???? (@DylanLeClair_) February 23, 2022

“While equities are getting all the attention, fixed income is the real driver around the world. Since yields rose dramatically in November, bond investors are beginning to realize that with inflation at a 40-year high, they are trapped in contracts programmed to reduce purchasing power.

This development marks the start of the US debt market, as noted in a February letter to investors issued by Pantera Capital explain “There has never been a point in history where full-year inflation was 7.5% and Fed funds were zero.”

The problem gets worse when looking at real interest rates, or post-inflation interest rate changes, which Pantera Capital puts at “-5.52%, a 50-year low.”

“The Fed’s manipulation of the US mortgage and Treasury markets is so extreme that they are now overvalued relative to the 50-year average real interest rate ($15 million).”

Source: Pantera Capital

Simultaneously with rising Treasury yields, the price of bitcoin (BTC) and the overall crypto market have steadily fallen, with BTC down more than 45% since November.

BTC/USDT daily frame price chart | Source: TradingView

The crypto market decline so far has been highly correlated with traditional markets, as noted by Pantera Capital, but that could soon change as “cryptocurrency tends to correlate with them over a period of about 70 days, which is a little over two months. and then it started to break.”

“As a result, we believe cryptocurrencies will essentially detach from traditional markets and start trading on their own over the next few weeks.”

Rising prices will be good for Bitcoin

Despite BTC’s weakness since the rate hike discussion began, the situation could improve soon, according to Pantera Capital, which warns that “10-year interest rates will triple from 1.34% to 4% to 5%.”

Based on the famous saying “Be fearful when others are greedy and greedy when others are fearful”, this may be the right time to start accumulating BTC as its “4-year yield is the lowest in history”. said Dan Morehead, CEO of Pantera Capital, shows that bitcoin is “relatively cheap” and “doesn’t appear to be overvalued.”

“Once people have a little time to think about it, they realize that blockchain is a relatively cheap commodity in a billion-dollar environment when you look at all the different asset classes. The prices are rising.”

Bitcoin price history vs. 4-year earnings | Source: Twitter

As for the recovery timeline, Morehead suggests changes are likely to come much sooner, possibly “weeks or months to a strong recovery.”

“We’re pretty bullish on the market and think prices are relatively cheap.”

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