- U.S. stocks and Bitcoin are up over the last few weeks and the 90-day correlation between Bitcoin and benchmark S&P 500 has restrengthened to 0.65, its highest level since 2010.
- Blockchain analysis of data from Glassnode, an analytics firm, suggests that Bitcoin active addresses remain within a downtrend channel, while transactions remain flat, meaning that a stable base of high conviction traders and investors remain engaged.
With the era of easy money and airdropped stimulus checks well behind us, cryptocurrency watchers are looking to stocks to see where cryptocurrencies could be headed next.
Even though the correlation between the Nasdaq 100 and Bitcoin has dropped to its lowest level in months, hitting a rolling 60-day correlation as low as 0.50 last month (a correlation of 1 means that two assets move in perfect lockstep), traders are still looking to equities to chart the outlook for crypto.
U.S. stocks and Bitcoin are up over the last few weeks and the 90-day correlation between Bitcoin and benchmark S&P 500 has restrengthened to 0.65, its highest level since 2010 and there is a growing view that crypto may be due for a bout of outperformance if equities have bottomed.
A robust U.S. jobs report last Friday however reignited fears that policymakers at the U.S. Federal Reserve may be emboldened to ratchet up rate hikes to focus solely on tackling inflation, especially since unemployment is not a major concern anymore.
Unfortunately, whether crypto or stocks have bottomed can only be known with the benefit of hindsight and it’s entirely possible that risk assets are stabilizing only to revisit fresh lows, whether this year or next.
Nonetheless, traders looking for some prospect of a more sanguine Fed at its next meeting in September could take some comfort from the fact that inflation appears to be slowing.
Front month WTI Crude Oil (Nymex) futures are trading well below US$100, ticking at US$88.84 at the time of writing and a gallon of gas at the pumps hasn’t been US$5 for some time in America.
Wheat futures are also well down from their recent all-time-highs and grain is slowly but surely making its way out of embattled Ukrainian ports.
Blockchain analysis of data from Glassnode, an analytics firm, suggests that Bitcoin active addresses remain within a downtrend channel, while transactions remain flat, meaning that a stable base of high conviction traders and investors remain engaged.
To that end, Bitcoin’s bottom may be (somewhat) more predictable than for stocks – because those who wanted to sell have already sold and those who remain are likely those who had bought when the cryptocurrency was a lot cheaper and are holding at all costs.
Bitcoin continues to hover around US$23,000 and has been unable to break a key resistance at US$24,000, especially in the absence of bullish macro factors, such as a Fed pivot to lower rate hikes (at the very minimum) which is unlikely in the coming months.
Even Coinbase Global’s partnership with the world’s largest asset manager BlackRock wasn’t enough to push Bitcoin higher, when in previous years, news of such a collaboration would have sent the cryptocurrency through the roof.
