Bitcoin has been trying to part ways with other risk assets for some time now, although so far… not very successfully.
According to current data, its correlation with Wall Street’s Nasdaq technology index over the past thirty days fell last week to 0.26, which is its lowest level since early January.
The correlation, which shows the extent to which the two assets are synchronized over a 30-day period, has hovered above 0.75 for much of the year and has sometimes approached a “perfect” 1:1 (at 0.96 and 0.93 in May and September).
For cryptocurrency enthusiasts, the “breakup” of bitcoin by Big Tech is a sign of strength.
“Growth has been constrained and investors are looking for the next growth sector. Bitcoin and cryptocurrencies are one of those ‘next’ growth industries,” said Santiago Portela, CEO of FITCHIN, a gaming ecosystem on Web3.
The decoupling effort indeed coincides with a period of comparative calm and consolidation, a year after it launched its epic first from the heady heights of $69,000 in November last year.
At the moment, Bitcoin is hovering near its monthly highs of $20,500, and last week it gained more than 5%, outperforming the Nasdaq, which rose 2%, despite disappointing quarterly results from Microsoft, Alphabet, Meta and Amazon.
Cold and hard crypto winter…
However, the crypto-winter is cold and hard.
The market capitalization for the cryptocurrency market has shrunk from nearly $3 trillion in November 2021 to $984 billion, according to CoinMarketCap.com.
Trading volume has also dropped to $61.3 million on October 25, a far cry from the daily volume of around $700 million seen last November, according to data from CryptoCompare.
On the other hand, the wealth held in bitcoin is at historically high levels, suggesting accumulation by long-term holders or “HODLers”, according to blockchain data company Glassnode.
In addition, 55,000 bitcoin were withdrawn from the largest exchange, Binance, on October 26, according to analytics platform CryptoQuant – flows that usually signal that coins are being moved into wallets for long-term storage.
“The base of BTC holders has changed radically, as it is no longer weighed down by speculators, who came in largely in 2021, in the community, whose members would not sell their BTC in almost any macroeconomic circumstance,” said Stéphane Ouellette, CEO at crypto derivatives provider FRNT Financial.
Is the bear market coming to an end?
Samuel Reid, managing director of consulting firm Geometric Energy Corporation, said the large outflows from stock markets could possibly indicate that some big buyers “smell” the end of the bear market.
However, only speculation can be made as to whether bitcoin will continue upward or retreat again, or whether it will recover quickly in the lap of tech stocks.
For the foreseeable future, macroeconomic events remain the driving force of a market that remains highly speculative. “The more speculative cryptocurrencies are, the more they are tied to the economy”, said Alex Miller, CEO of blockchain company Hiro Systems.
“That’s why we need to rethink how they are used and their productive capacity. The more they are used for other things, the less they will be connected to the economy and markets.”
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