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Bitcoin (BTC) and the inflation-adjusted yield of U.S. bonds are once again diverging, showcasing the most pronounced inverse relationship seen in the past four months.

The correlation between bitcoin and the 10-year U.S. inflation-indexed security, as measured by the 30-day correlation coefficient, has taken a surprising turn this month. It has shifted from a positive value of +0.28 to a significant negative value of -0.72, marking a level that hasn't been observed since April. These changes were observed on the TradingView charting platform. In the realm of correlation, a reading of 1 signifies that assets are moving in complete harmony, while a reading of -1 indicates precisely the opposite scenario.

The present analysis points to the resurgence of conventional financial practices and macroeconomic factors impacting the price of bitcoin. The inverse relationship ceased to hold in July, driven by positive sentiment surrounding the potential endorsement of a spot ETF.

Treasury inflation-indexed securities are linked to inflation, specifically to the non-seasonally adjusted U.S. city average Consumer Price Index (CPI) for all urban consumers. This data is published by the Bureau of Labor Statistics. The return on these securities is referred to as the real yield or inflation-adjusted yield.

In periods of negative real yields, investors often gravitate towards seeking returns from higher-risk options such as technology stocks and cryptocurrencies, as demonstrated in the year following the March 2020 crash induced by the coronavirus. Conversely, when real yields are positive and on the rise, investors are more inclined to feel motivated to allocate their investments into fixed-income securities.

The 30-day negative correlation between BTC and the real yield is now at its strongest since April.

The 10-year U.S. inflation-indexed security's yield climbed to 1.97% last week, marking its highest point since February 2009.

Bitcoin, the dominant cryptocurrency in terms of market value, experienced a drop of over 10%, marking its most substantial weekly decrease since the beginning of November. Gold, which typically exhibits an inverse correlation with actual yields, saw a decline of over 1%, marking its fourth consecutive weekly decrease, while the Nasdaq index recorded a 2.22% drop.

The overall prospects for high-risk investments have become more unfavorable due to increasing real yields, escalating energy expenses, apprehensions about China's economic situation, and the significant central banks' determination to maintain elevated borrowing expenses.