Nov 1 (Reuters) – After months of tears and anger, bitcoin is set to split with exchanges.
The cryptocurrency, which has been closely linked to tech stocks for most of 2022, is making one of its strongest efforts to break out yet.
Its 30-day correlation with the Nasdaq (.IXIC) fell to 0.26 last week, its lowest level since early January, where a measure of 1 indicates the two assets are moving in lock step.
The correlation, which shows the degree to which the two move in sync with each other over a 30-day period, has been above 0.75 for most of the year and has sometimes approached perfect unity – 0.96 and 0.93 in May and September.
For some cryptocurrencies, any bitcoin spill from Big Tech is a sign of strength.
“The growth of the latter has slowed down a bit and investors are looking for the next growth industry. Bitcoin and cryptocurrency are one of these ‘next’ growth industries,” said Santiago Portela, CEO of FITCHIN, a Web3 gaming ecosystem.
The nascent breakout actually coincides with a period of relative calm and consolidation for the fledgling cryptocurrency, which began its epic peak last November at a high of $69,000.
Bitcoin is nearing a one-month high of around $20,500 and has gained more than 5% in the past week, leading Microsoft ( MSFT.O ), Alphabet ( GOOGL.O ), Meta ( META.O ) and the Nasdaq to gain 2% on quarterly results. exceeded. Amazon ( AMZN.O ) was pulled.
The crypto winter was cold and hard.
According to CoinMarketCap.com, the total market capitalization of cryptocurrencies fell by more than a third, from about $3 trillion to $984 billion in November 2021.
CryptoCompare data shows that market participation has also declined, with the average daily trading volume of digital asset products falling to $61.3 million as of October 25.
Even so, months of steady sales have failed to displace the old hands who have been drilling despite the difficult economic backdrop.
According to blockchain data firm Glassnode, the dollar wealth held in bitcoins that have not been traded for three months or more is at an all-time high, indicating accumulation by long-term holders, or “HODLers.” The name of this group of difficult crypto investors originated from a trader’s typo in an online forum years ago.
In addition, a record 55,000 bitcoins were withdrawn from the largest exchange Binance on October 26, according to analytics platform CryptoQuant, flows that usually indicate that coins are moving to wallets for longer-term storage.
“BTC’s owner base has changed dramatically from being heavily weighted against speculators entering 2021, to a near-religious community of ‘HODLers’ who almost never sell their BTC in any macro environment,” said Stéphane Ouellette, CEO at crypto derivatives provider FRNT Financial.
“The market is now looking ahead to next week’s Fed meeting for further confirmation of the breakout of the risk asset/BTC correlation.”
NEXT FOR FICKLE BITCOIN?
Samuel Reid, CEO of consulting firm Geometric Energy Corporation, said the strong outflows from stocks could potentially indicate that some big buyers are “sniffing” the end of the bear market.
However, it’s anyone’s guess whether volatile bitcoin will start to rally, slide again, or quickly return to the arms of tech stocks.
For the foreseeable future, macroeconomics remains the driver of a highly speculative market.
“The more speculative a crypto is, the more connected it is to the macro,” said Alex Miller, CEO of blockchain firm Hiro Systems.
“What are those use cases and what is the productivity of the asset? The more it’s used for other things, the less it’s going to be tied to the macro.”
Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Additional reporting by Alun John in London; Edited by Vidya Ranganathan and Pravin Char
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