Treasury bonds and bitcoin

[brainactive]

There seems to be a belief by some people that:
1) The money that is currently put into negative-yielding Treasury bonds needs a new "home" and
2) That new "home" is likely to be bitcoin

Can someone explain this in more detail. Why are Treasury bonds being compared to bitcoin? I understand the rationale behind point 1, but don't really see why a large portion of it will move into bitcoin. I can see it moving away from Treasury bonds, but I also see it moving to stocks, real estate, gold, silver, other commodities, art, pokemon cards etc. 

[Azar138]

There seems to be a belief by some people that:
1) The money that is currently put into negative-yielding Treasury bonds needs a new "home" and
2) That new "home" is likely to be bitcoin

Can someone explain this in more detail. Why are Treasury bonds being compared to bitcoin? I understand the rationale behind point 1, but don't really see why a large portion of it will move into bitcoin. I can see it moving away from Treasury bonds, but I also see it moving to stocks, real estate, gold, silver, other commodities, art, pokemon cards etc. 

Treasury bonds is the most conservative and safe tool of investing, while bitcoin and crypto in general is the most risky investment option, so I also don't understand why there is a belief that people who are used to such conservative investment, will invest in risky Bitcoin. They are more likely to invest in stocks of reliable companies and commodities like you said.

[joniboini]

I don't think they are being compared in the same sense we (or some people) compare Bitcoin to gold. I'd just say that there is this kind of believe that some people are more open to riskier investment to prepare for another economic crisis or whatever narrative the media is going to push later. It is also possible that this narrative is being pushed to fuel retail investors to fomo into Bitcoin so other players can dump on them. Keep in mind that we are near the end of the bull cycle and who knows when the bear market will start.

[davis196]

Treasury bonds investors would never put their money into Bitcoin,because they hate risk.
That's the good part about treasury bonds-the guaranteed interest payments,even though the income might be negative due to the inflation rates.
AFAIK,the investors of federal and state bonds in the USA have some kind of tax deductions,so buying and holding such bonds comes with tax benefits.Maybe that's why they are still buying bonds,despite the negative ROI.Anyway,I'm not an expert on that subject.
The belief that many investors will just sell their treasury bonds and decide to buy Bitcoin is just ridiculous.

[Poker Player]

Treasury bonds is the most conservative and safe tool of investing, while bitcoin and crypto in general is the most risky investment option,

Treasury bonds investors would never put their money into Bitcoin,because they hate risk.

I would say that it is only risky in the short term, not in the long term, but surely the typical bonds investor would not think so, so you've got a point there.

What the OP says does not only apply to bonds, there are some Bitcoin enthusiasts, such as Saylor, who argue that much of the money that is invested in other financial assets, such as stocks, gold, real state, bonds, etc., will change and end up invested in Bitcoin because it is the highest quality asset that exists in the world.

[Bttzed03]

Others have already said that it's unlikely for the TB investors to move to speculative market but it probably depends on who we are asking. I can only guess there is a change in mindset for some of them. Maybe they found out how BTC has been the best performing asset even during the height of the pandemic. Maybe an effect of more institutions getting into crypto and SEC approving futures ETF.

[brainactive]

What the OP says does not only apply to bonds, there are some Bitcoin enthusiasts, such as Saylor, who argue that much of the money that is invested in other financial assets, such as stocks, gold, real state, bonds, etc., will change and end up invested in Bitcoin because it is the highest quality asset that exists in the world.

I've heard that before we well. Can I just ask what is meant by "Bitcoin is the highest quality asset"? Why is it the highest quality? And why do people use words like "pristine asset" to describe it?

[NeuroticFish]

Treasury bonds were supposed to give some small returns, which should ideally cover the inflation. Then they didn't cover the inflation. Then the returns became 0. And now the bonds have turned negative.
Of course that people look for something better. But, while enthusiasts will say that Bitcoin is the ultimate solution for investment, it's not. If the moment of selling is bad (bear market, crypto winter), Bitcoin investment can be a pain. On very long term Bitcoin is great, had wonderful returns. But only on very long terms. Hence, the best solution is diversifying, Bitcoin being one of the many things invested into. Then, in case of need, one can see what's the best one to sell.

Why are Treasury bonds being compared to bitcoin? 

Weren't the bonds OK for sale only at/after certain (long) period of time? My guess would be that, like Treasury Bonds, bitcoin investments work for very long holding times. Like the bonds, if one doesn't know when he will need money, he has to also have other investments. If so, Bitcoin can replace the bonds in the portfolio. But, as I said, it would be good that the portfolio has more than just bonds or bitcoin.

[fiulpro]

There seems to be a belief by some people that:
1) The money that is currently put into negative-yielding Treasury bonds needs a new "home" and
2) That new "home" is likely to be bitcoin

Can someone explain this in more detail. Why are Treasury bonds being compared to bitcoin? I understand the rationale behind point 1, but don't really see why a large portion of it will move into bitcoin. I can see it moving away from Treasury bonds, but I also see it moving to stocks, real estate, gold, silver, other commodities, art, pokemon cards etc. 

Treasury bonds generally pay a fixed interest rate and making that possible with Bitcoins would generally be impossible since they have super volatile rates which would make it not only harder for the company to analyze it but at the same time, it would not be a good idea for the people to hold them with a third party.

I understand the fact that it would be good to hold them for 20-30 years, but cryptocurrencies like bitcoins generally are best suited when they are owned by their owners and not by any third party since the whole point is actually nothing. But then again there are people who generally invest in Bitcoin futures so some might do that as well, but how different they would be from lending cryptos? Might be more secure but it would be wiser to just own your coins.

[franky1]

treasury bonds are a loan contract.
when a government needs to create money. they make a contract.
EG 1million contracts of $£1,000 loans. with a repayment of x% per year

the banks accept these contracts and give the government $£1billion
..
later the government through tax revenue pay back x% a year.
..
governemnts wanting $£ will not somehow buy bitcoin to then offer that as a asset to give to banks to then get banks to give the government £$.. as thats not how the bond system works or the money creation system or the loan system

it seems the topic creator does not know how the financial system works, else he would know that bonds cannot be confused with bitcoin.

put simply. governements need/want £$ creation. so .. where are they going to get the £$ to buy the bitcoin to use as collateral in the first place to then ask for £$

its an nonsensical scenario

[avikz]

There seems to be a belief by some people that:
1) The money that is currently put into negative-yielding Treasury bonds needs a new "home" and
2) That new "home" is likely to be bitcoin

Can someone explain this in more detail. Why are Treasury bonds being compared to bitcoin? I understand the rationale behind point 1, but don't really see why a large portion of it will move into bitcoin. I can see it moving away from Treasury bonds, but I also see it moving to stocks, real estate, gold, silver, other commodities, art, pokemon cards etc. 

Well the risk appetite is different for different segment of people. So people who are very conservative in nature, invest in Treasury bonds. It is consider as one of the safest investment of all time where government is the guarantor of the money. There is no chance to loose your money. This kind of investment was attractive when the interest rate was high.

On the other hand, bitcoin is a very risky investment. It can fetch you unmatched amount of profit, but at the same time, you can loose your money. But people who have a stable source of income, can take risks and invest in bitcoin. That's why with the rise of global income for individuals, we are seeing more money pouring into cryptos than traditional investments. And we are all seeing a boom in crypto price.

[Jonysins56]

Treasury bond is a bond with a guarantee. Those who are clever will never put their money in bitcoin, because they will never want to put their money in a risky place.
The good things about Treasury bonds are,
Providing guaranteed interest, although may be negative due to the inflation rate.
Investors have some taxes, the more transactions they make, the more benefits they will get. And in my opinion, this is the reason why many users are buying bonds because there are some negatives. So those who are still putting you at half the risk in Bitcoin other than using Treasury bonds may not be much smarter anyway.

[Coyster]

Treasury bond is a bond with a guarantee. Those who are clever will never put their money in bitcoin, because they will never want to put their money in a risky place.

There is little or no investment without risks, and any investment with minimal risk will also have very low ROI, Bitcoin is a different kind of investment, and it's not just an investment, it's a currency, it's anything its user wants it to be, is it risky? Yes, but it's not some pump and dump coin that has the possibility of going to zero and out of the market, it has an actual use case and even if it'll take time, it'll get to mass adoption, and no matter how many plunges, it'll rise back up again, of course clever people, even geniuses are putting their money into Bitcoin, that's cause they understand how the network operates, how the ROI works, and most importantly cause they want to be their own bank and control their finances.

[Fesatmas]

Regardless of how the flow of Treasure Bonds can attract Bitcoin. But what we need to worry about is that they are trying to make a profit then after that will only result in the Bitcoin market being dumped in a cruel way. Although it is hard to believe that Treasure Bonds are trying to invest their money in Bitcoin, but if you look at the benefits and risks in it, they are not necessarily investing in Bitcoin but they want to try to disrupt the Bitcoin market and then convince people to do so. switch to stocks, real estate after all their finances are pulled back into fiat or turn them back into stocks.

[GeorgeJohn]

<...>

Treasury bonds is the most conservative and safe tool of investing, while bitcoin and crypto in general is the most risky investment option,

cryptocurrency especially bitcoin from my own perspective and is obvious that everyone dwelling in this community knows very well that bitcoin is a perfect investment at this era of digital, so I'm disputing the fact that you labelled bitcoin as most risky option investment.

so I also don't understand why there is a belief that people who are used to such conservative investment, will invest in risky Bitcoin. They are more likely to invest in stocks of reliable companies and commodities like you said.

those companies that you are emphasising on as a reliable platform for investment can never be nice to everyone or everybody via investment. So let us try to not think otherwise via bitcoin, from my own view BTC is my best investment that favour me more than all this manual and industrial investment.

[DarkDays]

There seems to be a belief by some people that:
1) The money that is currently put into negative-yielding Treasury bonds needs a new "home" and
2) That new "home" is likely to be bitcoin

Can someone explain this in more detail. Why are Treasury bonds being compared to bitcoin? I understand the rationale behind point 1, but don't really see why a large portion of it will move into bitcoin. I can see it moving away from Treasury bonds, but I also see it moving to stocks, real estate, gold, silver, other commodities, art, pokemon cards etc. 

There isn't a simple or a straight answer to this. Sometimes people act in a predictable way!!!

This is to say that some people feel the hype of Bitcoin and learn the truth of how profitable it can be relative to alternatives outside of the crypto space (while having been omitted from the fact that timing is critical) and so start moving their funds to the one coin that they think it will do better, for some with the lack of knowledge that it make take years to reap the rewards.

It is not a bad thing, it is a sign of growth and one that hopefully translates into people becoming more curious about the space and spend the time it takes to learn about it.

[Poker Player]

I've heard that before we well. Can I just ask what is meant by "Bitcoin is the highest quality asset"? Why is it the highest quality? And why do people use words like "pristine asset" to describe it?

Think about how you would transfer $1B of wealth into different assets. How long it would take you to move that amount of gold, or Real State, to another country, how easy or how difficult it would be, and what it would cost. Try sending $1B of wealth you have in gold, stocks, bonds or Real State to Madagascar today. And then think how easy it is to do it with Bitcoin and how cheap it is.

The return that Bitcoin has given since its creation is due to its intrinsic characteristics, decentralization, limit to supply, diminishing supply, the security of proof-of-work, etc. These characteristics that make it a safe asset to store wealth, easy to transport and easy to transfer are what make Bitcoin a pristine asset.

[habebe]

The asymmetric upside of bitcoin is tangential to bonds' asymmetric downside as traditional treasury assets collapse and bitcoin rises and bonds to bitcoin are the ones that protect us towards inflation .. right now there is a monetary policy aim to eliminate inflation  which states to employment and which states the regime is changeable for the investor.

[Zilon]

Negative yielding Treasury bond could just be a sarcastic exclamation. Because Treasury bonds are secure investment options with positive yield but when it comes to cryptocurrency in general with Bitcoin not exclusive risk is inevitable. As long as the market remains unstable profit and losses comes in at will.

Even as centralized as stocks, real estate even metals might sound it's a more secured and less risky investment. Cryptocurrency could give your even more than all the centralized investment can offer but the risk is very high due to price fluctuation

[Fortify]

There seems to be a belief by some people that:
1) The money that is currently put into negative-yielding Treasury bonds needs a new "home" and
2) That new "home" is likely to be bitcoin

Can someone explain this in more detail. Why are Treasury bonds being compared to bitcoin? I understand the rationale behind point 1, but don't really see why a large portion of it will move into bitcoin. I can see it moving away from Treasury bonds, but I also see it moving to stocks, real estate, gold, silver, other commodities, art, pokemon cards etc. 

This seems like it is a bit late to the party. Interest rates were at record lows the last few years, meaning that investors had to look to potentially riskier assets to make a return on their money - so a lot of it flowed into all sorts of things like property, stocks and things like cryptocurrency. The money printing press has also been running at full speed pretty much since the 2008 financial crisis, meaning there is a lot of cheap money floating around the economy which is also looking for a return on investment. What we could start to see in the coming years is inflation going up, which means interest rate rises as central banks try to cool it off but Bitcoin will still stay strong regardless.