Is The Bitcoin Price Still Correlated With Financial Markets?

This is an opinion editorial by Mike Ermolaev, head of public relations and content at Kikimora Labs.Setting The Context: Global Economy FundamentalsThe economy is still recovering from the COVID-19 break out as brand-new issues arise. We are now in a time of rampant inflation with main banks trying to fix that by raising interest rates. The U.S. CPI information (consumer price index), released on October 13, came in higher than anticipated (8.2% year-over-year), adversely affecting the bitcoin price. But inflation is not the only issue, the international economy is likewise fighting with the energy crisis, affecting Europe more than the U.S., due to its strong dependency on Russian natural gas and basic material. On the eastern side, the war in Ukraine with occurring sanctions on Russia, include further geopolitical instability and financial unpredictability. Likewise, Chinas zero-COVID policy is interrupting the supply chain worldwide, and the Evergrande default undermines one of the worlds greatest economies.If we look at the primary currencies, the dollar index looks strong, compared to others. The Federal Reserve raised rates of interest by 75 basis points in November, and the Bank of England raised rates of interest by the very same quantity. This policy of quantitative tightening aims to reduce the cash supply and alleviate price pressure. It is likely to continue into next year and beyond. Nevertheless, a worldwide economic crisis and threat of stagflation is still extremely strong, so no country may feel safe from reserve bank financial policy.Bitcoin Correlation With The EconomyBitcoin has shown not to be immune from this international chaos. Although the cost in its early stage was independent of traditional financing, connection started to reveal in 2016.(Source)The concept of bitcoin as a “digital gold” ended up being popular since both shared the shortage and problem of extraction (mining), in addition to fulfilled the role of being a store of value. Since lots of view bitcoin as a threat property, its connection with the S&P 500 and Nasdaq-100 became visible– no different than standard stocks.At the time of composing, bitcoins 40-day rate correlation with gold reached 0.50 (after being around no in August). According to Alkesh Shah and Andrew Moss, strategists from Bank of America:”A slowing down favorable connection with SPX/QQQ and a quickly increasing connection with XAU suggest that financiers might see bitcoin as a relative safe house as macro uncertainty continues and a market bottom remains to be seen.”Negative EventsThere are some macroeconomic aspects in the bigger cryptocurrency ecosystem that added to a bearish market: the Terra/LUNA collapse, required liquidation of Three Arrows Capital and the insolvency of Celsius being the primary ones.The incoming bitcoin mining regulations by the EU and the present success crisis of bitcoin mining need to be likewise taken into consideration.Bitcoin: Present And FutureDespite all the above adverse occasions, bitcoin was able to somehow keep its cost in the $19,000-$20,000 range, with record-low volatility. Presently, we are observing unusual stability in the bitcoin rate, recently even matching volatility of the British pound.On the contrary, stocks have actually experienced high volatility and whipsaw rate action, likewise following speculations about the Feds future decisions. According to Bloombergs Chief Commodity Strategist Mike McGlone, thats why bitcoin may rise after a high discount rate and ultimately beat the S&P 500. He believes that bitcoins limited supply and deflationary approach might assist it recuperate its previous price levels.Since the last flash crash in mid-June, the price has actually been rather constant, but we understand it seldom sits still for too long. This indicates that the possibility of an unexpected (bearish or bullish) breakout increases over time. The longer the price stays idle, the more powerful the breakout is going to be.Bitcoin price consolidationAdditionally, the BTC futures open interest is higher than ever, with liquidations reaching all-time low. A lot of liquidity is accumulating here, meaning that there will be an even more powerful impulse when the cost starts to move again.(Source)According to the strategist Benjamin Cowen, bitcoin is anticipated to rise to “reasonable worth,” after falling an extra 15%. “Right now, the information would suggest that were about 50% undervalued compared to where the reasonable worth is.” Cowen believes we might need to wait till early 2024 to see this increase occur.(Source)Goldman Sachs strategist Kamakshya Trivedi has a different view, claiming that the U.S. dollar index, showing record values given that 2002, may be bad news for the presently bearish bitcoin. A Bearish Scenario: Could The 2018 Drop Happen Again?Some analysts have been questioning if the 2018 situation (low volatility, then big rate drop) might happen once again today because the marketplace conditions look rather comparable. We have the exact same 10% trading variety and we understand something is going to occur soon.Comparison between 2022 BTC rate (top) versus 2018 (bottom) using eight-hour candle lights. (Source)An amazing distinction between the 2 cycles is that in 2018 there was a boost in addresses sent out to find exchanges, while in our existing cycle we are observing liquidity moving far from exchanges and few new addresses being created. According to a CryptoQuant expert, this should suggest that we will not witness a similar situation to 2018. A 2018/2022 comparison of spot exchange depositing addresses. (Source)What About Uptober and Moonvember?Historically, Q4 is a good time for bitcoin, with bullish trends beginning in October and increasing in November. So the months of October and November were colloquially renamed “Uptober” and “Moonvember”– at least, this is what happened back in 2021. Can we still anticipate such a bullish Q4 in 2022? Its hard to state, however the adverse macroeconomic scenario and geopolitical issues make it harder to think of the very same rally we saw in 2015. The bitcoin market has actually been down for 10 consecutive months and we do not see any specific indication of recovery at the moment.We must likewise keep in mind that, despite the negative global situation, the “safe sanctuary” function of bitcoin might contribute to giving the price some additional strength, particularly in these distressed times.Exchange Data AnalysisLiquidation information on the Bitfinex exchange was examined by filbfilb. He concluded that an upward breakout would have less momentum than a downward one. In fact, liquidity above $20,500 is primarily 10x, while liquidity listed below $18,000 is primarily 10x, 5x and 3x, which implies that a bullish breakout would be “less brutal” than a bearish one.Bitfinex liquidation chart. (Source)ConclusionsWe are presently seeing a duration of tension in the bitcoin market. The bitcoin rate requires to start moving again after 2 months of combination. The total economic situation does not look bright at all, and bitcoin is correlated to occasions in the real world, however financiers can still recognize the digital gold, safe-haven role of the most popular cryptocurrency. A strong bitcoin cost breakout is expected, with brand-new volatility incoming.The possible scenarios may be: a quick dump and then a bullish recovery (V-shaped bounce) or a longer and much deeper price collapse, after the break of the $19,000 resistance level. Whatever takes place, bitcoin will keep being the most innovative technology of the last decade, permitting monetary freedom and direct control over ones own wealth. Bitcoin has actually historically experienced numerous strong bearish times and has actually always recuperated from them.This is a visitor post by Mike Ermolaev. Opinions expressed are completely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

The U.S. CPI data (consumer cost index), launched on October 13, came in higher than anticipated (8.2% year-over-year), negatively affecting the bitcoin cost. Given that lots of view bitcoin as a threat property, its correlation with the S&P 500 and Nasdaq-100 ended up being visible– no various than traditional stocks.At the time of composing, bitcoins 40-day rate correlation with gold reached 0.50 (after being around no in August).”Negative EventsThere are some macroeconomic elements in the larger cryptocurrency environment that contributed to a bearish market: the Terra/LUNA collapse, required liquidation of Three Arrows Capital and the insolvency of Celsius being the main ones.The inbound bitcoin mining policies by the EU and the present success crisis of bitcoin mining must be also taken into consideration.Bitcoin: Present And FutureDespite all the above unfavorable events, bitcoin was able to in some way keep its price in the $19,000-$20,000 range, with record-low volatility. The bitcoin market has actually been down for 10 successive months and we do not see any specific indication of recovery at the moment.We should also keep in mind that, in spite of the unfavorable global scenario, the “safe sanctuary” role of bitcoin may contribute to giving the cost some extra strength, specifically in these struggling times.Exchange Data AnalysisLiquidation data on the Bitfinex exchange was examined by filbfilb. A strong bitcoin cost breakout is expected, with new volatility incoming.The possible scenarios may be: a fast dump and then a bullish healing (V-shaped bounce) or a longer and much deeper price collapse, after the break of the $19,000 resistance level.

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