- Bitcoin rebounded briefly over US$41,000 alongside equities as China indicated that it was set to loosen monetary policy and as risk assets saw a broad-based rebound, but the recovery was short-lived.
- Not helping matters is that Bitcoin’s correlation with tech stocks is stronger than ever, and so long as the latter remains sensitive to rate hikes, so will the cryptocurrency.
Bitcoin rebounded briefly over US$41,000 alongside equities as China indicated that it was set to loosen monetary policy and as risk assets saw a broad-based rebound, but the recovery was short-lived.
While technical traders who watch charts suggest that a short-term rebound to as high as US$51,000 remains possible, this also assumes that the benchmark cryptocurrency is able to break above its 200-day moving average at US$48,000 and so far, there appear to be few signs of that happening.
Investors remain concerned that central bank policy will play a keener role with cryptocurrencies, and despite plenty of evidence that at current prices, Bitcoin has been oversold, it still remains largely rangebound between US$37,500 and US$47,500, with few (if any) catalysts to take in either direction.
Not helping matters is that Bitcoin’s correlation with tech stocks is stronger than ever, and so long as the latter remains sensitive to rate hikes, so will the cryptocurrency.
But Bitcoin’s strong correlation with tech stocks cuts both ways, enjoying rallies and retreats based on rate-sensitive sentiment.
Nevertheless, China’s State Council, which hinted that it will be rolling out measures to support the country’s moribund economy, has provided some tailwinds for Bitcoin and blockchain flow data seems to suggest that there is evidence of investors “buying the dip.”
And while Bitcoin makes headlines as more institutional participation makes it susceptible to macro factors, other cryptocurrencies, referred to as “altcoins” appear to be breaking their correlation with the benchmark digital asset.
Over the past month, Ether, which has until fairly recently had a dependable correlation with Bitcoin, has somewhat “decoupled” itself, with Ether rallying 24% over the past month versus just 7% for Bitcoin.
Nevertheless, momentum traders may be the best placed to ply the cryptocurrency markets in their current conception, with rallies likely to be as short-lived as retreats.
Bitcoin has dipped below US$40,000 on repeated occasions this week, with some suggesting that it will head lower to its second level of support, a scenario that has thus far failed to play out.
Each time Bitcoin has dipped below US$40,000, it has rebounded soon after to well over the psychologically-significant level of resistance and support.
In that sense, neither bulls nor bears have fully captured the narrative when it comes to Bitcoin.
