This week started off pretty well as Bitcoin price rose above $42,000 on Monday, December 4th. However, Bitcoin has entered partial consolidation and is currently trading at $41,762, with a market cap of $817 billion.
Correlation of BTC with stocks
Bitcoin's incredible 150% gain this year in 2023 has helped Bitcoin break its strong correlation with stocks. Instead, BTC’s correlation with stocks has declined this year.
Bitcoin demonstrated its resilience and bullish momentum by rising 5.8% on Monday to surpass $42,000. In stark contrast, traditional indicators such as global stocks and bonds posted losses at the start of the week.
Analysts including Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC, highlighted this divergence as an indication of Bitcoin's current low correlation with traditional macro assets.
Courtesy: Bloomberg
Over the course of 2023, Bitcoin's correlations with stocks and gold have decreased. The 90-day correlation coefficient between Bitcoin and MSCI Inc.'s global stock index fell to 0.18 from 0.60 at the start of the year. Likewise, the correlation between Bitcoin and spot gold has dropped from 0.36 to almost zero. This shift suggests less directionality in movements and underscores Bitcoin's evolving status as a standalone and less pegged asset in the financial landscape.
Bitcoin open interest at two-year high
Open interest in Bitcoin perpetual futures on the Deribit derivatives exchange has risen to a yearly high, reaching $740 million. This level has not been seen since November 2021 and coincided with Bitcoin's all-time high of over $68,000.
Courtesy: Deribit
Increased open interest signals a renewed inflow of funds into the market, reflecting increased participation and potential liquidity. Justin d'Anethan, Head of Business Development for APAC at Keyrock, points to the notable premium in CME Bitcoin futures contracts as an additional indicator of increased institutional commitment.
D’Anethan explained: “One cannot help but notice a healthy futures premium on CME contracts, suggesting that some large, sophisticated players are seeking BTC exposure.” This observation is consistent with data from the Data Dashboard from The Block, showing all-time high CME Bitcoin long open interest from asset managers of nearly $2.2 billion.
D'Anethan further emphasized that the increasing participation of experienced players will likely be influenced by the upcoming decision on spot Bitcoin ETFs, which is expected to come in mid-late January. This development highlights the evolving momentum and growing institutional interest in the Bitcoin market.
On the technical chart, the current Bitcoin RSI is at 76.5, indicating an overbought condition. An RSI drop below 65 could push Bitcoin price further towards $50,000.
While everyone is talking and looking forward to the launch of the Bitcoin ETF next month, another major catalyst is the upcoming Bitcoin halving in April 2024. Historical trends suggest that the Bitcoin halving will be a major catalyst for the rise of the Bitcoin ETF BTC price was. Analysts have already started making bullish price predictions of up to $500,000 for the next Bitcoin bull run.
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