Cryptocurrency investors have been greatly disappointed in Bitcoin over the past few weeks, with its lackluster price action seeming to invalidate the safe haven story that many investors have told before.
BTC has a strong correlation with the traditional stock market, however, showing some signs of disruption, along with this disassociation potential that comes after the cryptocurrency clears months of gains for several weeks.
If this happens, it could lead to a new flow of capital from investors, potentially boosting its price action as the global economy continues to collapse.
Bitcoin continues to follow the stock market: there is a slight growth today
Despite trading independently from traditional markets over the weekend, BTC once again followed the US stock market last night.
However, BTC prices were able to rebound this morning, the traditional market seen after the stock market opened.
This recovery has occurred due to news regarding the Fed's plan to take unprecedented actions to try to protect the US economy from the effects of the rapidly spreading corona virus.
The rebound of futures contracts before the market opened today drove Bitcoin to a high of nearly $ 7,000, which is the time period where it found significant resistance that brought it back to the region. $ 6,700 lower.
Analyst Cantering Clark explained that Bitcoin's return from its high is based solely on a stock exchange, which is not scalable, with BTC and the stock market as “dance partners”.
The success of calling that run the highs idea before dumping is mirage, even for myself.
– Cantering Clark (@CanteringClark) March 23, 2020
Does BTC show some initial signs of separation from traditional markets?
Although Bitcoin and stock may now be dance partners, analyst Willy Woo explained in a recent tweet that BTC is beginning to show signs of exiting the market.
Seeking the decoupling …
Here’s where we are in the timeline compared to the 2008 banking crisis.
– Willy Woo (@woonomic) March 23, 2020
“Seek detachment. This is where we are similar to the time of the 2008 banking crisis. The safe haven separation from stocks suggests that it may have started (i.e. when BTC and Gold price increase). We will have more confirmations in a week. ”
Bitcoin and gold outperform the S&P 500 after the Fed's infinite QE news
On March 23, following news of one of the most impressive monetary stimulus ever, both gold and Bitcoin witnessed strong protests while capital indices Global owners, namely the S&P 500 (North America) and Euro Stoxx 50 (Europe), have been submerged, reaching a multi-year low.
In the minutes after the indefinite QE measure was announced, everything from stocks and gold to Bitcoin and crude oil immediately reversed, with investors seemingly understanding the announcement as a float. Lifesaving for a developing economy.
However, only two assets worth billions of dollars have kept their profits and have continued to increase since the announcement: Bitcoin and gold.
In the chart above, since the Federal Reserve's announcement, Bitcoin has risen 9.5% and gold has risen 4% while the S&P 500 futures, reflecting most of the value of the stocks. US-based, down 0.25%.
What is particularly important about these statistics is that these are some of the best days of Bitcoin and gold in 2019, emphasizing the importance of the Fed's stimulus to these two assets.
We may be on the cusp of dividing between two types of assets: These types of assets will be driven by historical levels of monetary stimulus and those will perform poorly, even in a world where Central banks are printing trillions of dollars.
Willy Woo commented that during a flight to a safe place, there are two main stages:
- What we've seen since mid-February up to now: All liquid assets are quickly sold out of fiat, mainly US dollars, to finance living expenses or business expenses. in the case of companies. This was demonstrated on March 12, when the S&P 500 fell 8%, oil fell more than 8%, gold fell from $ 1,640 to $ 1,560 and Bitcoin witnessed the second worst of it, down from $ 7,700 to $ 4,000.
- What can happen now: Once fear begins to subside, money begins to return to financial markets through assets that are likely to gain value under poor economic conditions, often coinciding with High level of stimulus and fiscal.
In this case, the most likely asset in the macro environment is gold and Bitcoin, Woo said. This will explain today's superiority and why gold has risen while the stock market performed poorly between 2009 and 2011.
Ari Paul, CIO of the crypto portfolio manager BlockTower Capital and the former portfolio manager at the University of Chicago funding fund, corroborates this, explaining that considering “statements Clearly about the 'infinite' money supply of the Fed, he found it very likely “BTC and gold (will) sustainably rise even before stocks begin to recover.”
Bitcoin, in particular, has a chance to shine. According to Robert Breedlove, founder and CEO of Parallax Digital hedge fund and consultancy:
Zero and infinity are reciprocal: 1 / ∞ = 0 and 1/0 = ∞
– 🔨Robert Breedlove (@ Breedlove22) March 23, 2020
“'The infinite cash in the Federal Reserve System means that all will eventually be worth zero. Bitcoin is specifically designed as a countermeasure to this. ”
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