COVID-19 Panic Tests Bitcoin: USD/BTC (BTC=X) Uncorrelated Asset Narrative
Bitcoin Trading Correlation with S&P 500 Reaches All-Time High
Data from crypto analytics platform Coin Metrics shows that the correlation between the two top-ranked cryptos — Bitcoin and Ethereum, and the S&P 500 reached an all-time high (ATH) levels over the last 30 days.
Like the Nasdaq and the Dow, the S&P 500 helps investors monitor the share price performance of major corporations in the U.S. stock market. In the past, Bitcoin’s uncorrelated relationship with the S&P 500 has been highlighted by crypto proponents as a pointer to BTC’s safe-haven asset status.
However, events of the past 30 days appear to be testing the validity of the non-correlated argument for Bitcoin. Back in late February 2020, BTC’s correlation with the S&P 500 stood at -0.04.
Less than a month later, on March 17, the correlation surged massively to 0.60 — the highest ever recorded. The events that occurred between late February and now offer up many clues as to why the correlation increased dramatically.
It began in early March when the World Health Organization (WHO) classified the coronavirus epidemic as a pandemic. At the time, both Russia and Saudi Arabia were embroiled in an oil price tussle with the resultant uncertainty driving investors to liquidate assets en masse.
Such has been the extent of the asset selloffs that age-old safe havens like gold haven’t been spared. As of press time, the gold price is at its lowest price level since early November 2019, losing more than $180 since March 9, 2020.
Cash Is Still King
The current market uncertainty represents Bitcoin’s first litmus test as a hedge against upheavals in the mainstream arena. However, as far as initial reactions go, it appears cash is still king for a significant percentage of asset owners.
With investors de-risking, assets are being liquidated for cash as cryptos have yet to gain widespread retail merchant adoption. With the U.S. Federal Reserve pumping trillions of dollars in fiscal stimulus packages, Bitcoin’s hard supply cap might incentivize more investors to “hodl” rather than sell thus improving the crypto’s liquidity status.
However, there appears to still be pain ahead for the BTC price action, with market analyst Peter Brandt highlighting the formation of a “flag pattern” which might signal another downward push in the BTC price. Since dropping to $3,800 back in mid-March, the top-ranked crypto has been unable to reclaim the $7,000 price mark.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 7,652.08.
The projected upper bound is: 7,301.46.
The projected lower bound is: 4,606.93.
The projected closing price is: 5,954.19.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 19 white candles and 31 black candles for a net of 12 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 62.0426. This is not an overbought or oversold reading. The last signal was a buy 9 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 39.52. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 3 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -4. This is not a topping or bottoming area. The last signal was a buy 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.
Rex Takasugi – TD Profile
FOREX BTC= closed down -313.720 at 6,020.880. Volume was 151% above average (trending) and Bollinger Bands were 189% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 5,697.19 8,529.10 8,406.35
Volatility: 185 127 80
Volume: 631,160 367,059 157,898
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX BTC= is currently 28.4% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of BTC= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on BTC= and have had this outlook for the last 30 periods.
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