Bitcoin seeks to sever ties with stocks

Bitcoin is making one of its most determined attempts to break away from the tech stocks that have dominated its turbulent 2022.

The 30-day correlation between it and the Nasdaq (.IXIC), where a value of 1 implies that the two assets are moving in unison, dropped to 0.26 last week, the lowest level since early January.

The correlation, which measures how well the two move in unison over a 30-day period, has been above 0.75 for the majority of the year and occasionally has been close to perfect unanimity, reaching 0.96 and 0.93 in May and September, respectively.

Any separation of Bitcoin from Big Tech is seen as a sign of strength by some crypto supporters.

"The latter’s growth has been somewhat tapped out, and investors are looking for the next growth industry. Bitcoin and crypto is one of those ‘next’ growth industries," according to Santiago Portela, CEO of FITCHIN, a Web3 gaming ecosystem.

A year after the young cryptocurrency started its epic slide from the dizzying heights of $69,000 achieved in November last year, the nascent uncoupling does actually coincide with a period of comparative quiet and consolidation.

Bitcoin recently increased by almost 5%, outpacing the Nasdaq's 2% gain as gloomy quarterly results from Microsoft (MSFT.O), Alphabet (GOOGL.O), Meta (META.O), and Amazon (AMZN.O) weighed. It is currently trading around one-month highs over $20,500.

According to CoinMarketCap.com, the overall market value of cryptocurrencies has decreased by more than a third to $984 billion from about $3 trillion in November 2021.

Data from CryptoCompare reveals that market activity has decreased as well, with the average daily trading volume of digital asset goods falling to $61.3 million as of October 25 from daily volumes of almost $700 million recorded in November last year.

However, despite a dismal economic climate, months of repeated selling have not been able to shake off the experienced people, who are digging in.

According to blockchain analytics company Glassnode, the dollar wealth held in bitcoins that have not been sold in three months or more is at an all-time high, indicating accumulation by long-term holders or "HODLers". Years ago, a trader's misspelling of "hold" on an internet forum gave rise to the name for that group of fervent cryptocurrency investors.

Furthermore, analytics site CryptoQuant revealed that a record 55,000 bitcoin were withdrawn from the biggest exchange Binance on October 26. Flows like this often indicate that coins are going to wallets for longer-term safekeeping.

According to Stéphane Ouellette, CEO of cryptocurrency derivatives provider FRNT Financial, "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."

Heavy withdrawals from exchanges, according to Samuel Reid, CEO of the consulting firm Geometric Energy Corporation, may be a sign that some significant buyers have "sniffed out" the conclusion of the bear market.

But nobody can predict if erratic bitcoin will start to soar, sink once again, or quickly comeback to the embrace of technology stocks.

Macroeconomics will continue to be the main force behind a market that will likely always be highly speculative.

According to Alex Miller, CEO of blockchain company Hiro Systems, "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."

By fLEXI tEAM