In our most recent monthly analysis, which focuses mostly on the changing macroeconomic climate, we emphasised the strong association between bitcoin and equities for the year 2020. At the same time, bitcoin was functioning as a quasi-24/7/365, inverse VIX index (currently) Additionally known as,, and. In general, this indicates that bitcoin’s value has increased in tandem with the rise in stock prices; conversely, if stock prices fall (perhaps due to an increase in the VIX), bitcoin’s value will be subject to additional downward pressure.
Participants in the market should keep in mind that after the LUNA/UST explosion, bitcoin prices stabilised around $30,000 for approximately one month before the volatility of the equity markets rose. This caused stocks to make a new bottom, which in turn pushed bitcoin prices lower. Achieved without the assistance of any meaningful support. The question is, what makes the current trend so unique? Both markets, however, are subject to exogenous influences, which have the potential to influence pricing as well as previous realised correlations. Bitcoin’s price action has begun to rebound in a substantial way, with short squeezes mostly already occurring in its derivatives market. This comes as equities continue to be bid higher as a result of passive inflows and late bearish squeezes.
Bitcoin is currently trading in the middle of its seventh daily candle that is coloured red (lower closing price than opening).
Bitcoin’s price action has started to return in a big way as equities continue to be bid higher. However, while the S&P 500 is making gains, bitcoin is not following suit and is still falling behind.
In light of the fact that equity markets are now participating in a wide rise, underperformance in the short term is a cause for concern for bulls. One must question themselves where bitcoin will trade if/when equity markets drop and/or in legacy markets. The volatile nature of the situation grows dramatically.
Despite the fact that this issue focuses more on short-term price action and less on long-term fundamentals, it is consistent with our larger market thesis that risk assets have not yet reached a bottom, which was discussed in our monthly report for July. Realized correlations and relative underperformance are predictable and noteworthy, respectively, given bitcoin’s still-nascent location as a small pond within a worldwide ocean of total assets. This is due to the fact that macroeconomics currently reigns supreme over all other aspects of finance.