Bitcoin Strives To Break Its Bond With Stocks

After several months of tears and tantrums, bitcoin wants to split up with the stock markets. This crypto has been closely correlated with tech stocks for most of its torrid 2022. But, it is staging one of its strongest efforts yet to break away from the Stock market.

Its 30-day correlation with the NASDAQ dropped to 0.26 in the past week, its level lowest since early January, where a measure of 1 means that the two assets are moving in lockstep.

The correlation, which shows the degree to which the two move in sync with one another over a 30-day period, has hovered above 0.75 for most of the year and at times has even approached perfect unison at 0.96 and 0.93 in May and September.

For some of the crypto proponents, any bitcoin break-up from Big Tech is considered a sign of strength. Santiago Portela, CEO of FITCHIN, a Web3 gaming network, said:

“The latter’s growth has been somewhat tapped out, and investors are looking for the next growth industry. Bitcoin and crypto are one of those ‘next’ growth industries.”

The budding uncoupling does coincide with a period of comparative calm and consolidation for teenage crypto around a year after it started its epic drop from the heady heights of $69,000 that was reached in November 2021.

Bitcoin is now hovering near one-month highs around $20,500 and rose more than 5% in the past week, outperforming the Nasdaq’s 2% gain as four quarterly results from Alphabet, Microsoft, Amazon, and Meta weighed.

Holders Are Holding Out

The crypto winter has been cold, hard, and persistent.

Notably, the total market cap for cryptos has shrunk by over two third to $990 billion from nearly $3 trillion in November 2021, based on data acquired from CoinMarketCap.

Market participation has also plummeted, with the average daily trading volume of the digital asset products plunging to $61.3 million as of October 25, considerably far from the daily volumes of nearly $700 million recorded in November 2021, CryptoCompare data shows.

Nevertheless, months of persistent selling have failed to shake out the old hands from the market, who are now digging in despite the grim economic backdrop.

The dollar wealth held in Bitcoin that has not been traded for three months or more is at an all-time high, which means that there is accumulation by the long-term holders or “HODLers”, as highlighted by blockchain data company Glassnode. The name for this group of diehard crypto investors emerged some years ago from a trader misspelling ‘hold’ on one online platform.

Moreover, a record 55,000 bitcoin were withdrawn from the biggest exchange Binance on October 26, based on the analytics platform CryptoQuant. These flows normally indicate that coins are moving to wallets for long-term storage.

Stéphane Ouellette, CEO at crypto derivatives provider FRNT Financial, said:

“The holder base of BTC has changed drastically from being heavily weighted towards speculators, which largely came in in 2021, to the near cult-like ‘HODLer’ community which would not sell their BTC in almost any macro circumstance. The market is now looking to the Fed meeting next week for further confirmation of the risk asset/BTC correlation breakdown.”

Next For Fickle Bitcoin?

The CEO of consulting firm Geometric Energy Corporation, Samuel Reid, said that heavy outflows from exchanges might possibly indicate that some large buyers were “sniffing out” the end of the bear market.

It is now anybody’s guess whether weak bitcoin will start rallying, plunge anew, or it will quickly rebound to embrace technology stocks. For the neat and mid-term, macroeconomics remain the main driver of a market that is still highly speculative in nature.

Alex Miller, CEO of blockchain firm Hiro Systems, commented:

“The more speculative crypto is, the more it is tied to macro. It comes back to, what are the use cases and what’s the productive capability of the asset? The more it’s being used for other things, the less it’ll be tied to macro.”