What’s wrong with Bitcoin's rising tech correlation? – Cryptocurrency news



The king of crypto - Bitcoin - fell in tandem with tech stocks this week, with the correlation between the two assets rising to a new high. Determining how cryptos behave is generally a tough job to achieve and some association with traditional markets is apparently great news, especially for analysts, even if nothing should be taken as given. However, from traders’ perspective, a growing correlation may not be very desirable at the moment.

Bitcoin's safe-haven feature

Usually, price swings in cryptocurrencies don’t have a precise explanation because of their unregulated nature and the absence of control bodies such as central banks, governments and financial institutions, whose decisions are always key drivers in traditional FX, stock, bond, and commodity markets.

While the above consequently makes trading in digital coins more speculative, even though several economies are enhancing regulations around the financing of blockchain networks, the truth is that traders enjoy cryptos’ detachment from governments and central banks’ sphere of influence.

During the hardest times of the pandemic, the outstanding rally in Bitcoin made some investors view the crypto market as a safe-haven and consider it a better alternative to gold, which surprisingly could not efficiently sustain its upturn. Then, the war in Ukraine brought the crypto market back to the epicentre as international sanctions on Russia and domestic capital controls in Russia incentivized the usage of digital currencies to preserve wealth and liquidity. Governments suggest cryptocurrencies cannot be used to evade sanctions. However, as a Wall Street Journal headline wisely states, if cryptos cannot be used when financial systems are at risk, what is the point of using them, anyway?

Bitcoin mimics tech indices

The hypothetical safe-haven status, however, broke down in April and the interconnection with the US stock markets came back into play. Strikingly, Bitcoin’s profit taking from the 200-day simple moving average (SMA) at $48,163 overlapped the sell-off in US tech indices, with the 90-day correlation with the tech-led Nasdaq 100 jumping to the highest on record this week. During the same period in 2019, the link with the index was negligible, while it was even muted with other US stock indices.

Correlation could harm Bitcoin

Apparently, no one can be certain where cryptos are in their market cycle and if the strong correlation will soon disappear. However, what can be argued at the moment is that the strong positive association has popped up at the wrong time.

The reasoning is that US headline CPI inflation clocked in at 8.5% y/y in March, the highest since 1981, while the core measure, which excludes volatile food and energy prices, surged to 6.5% as expected. Although, analysts translated the moderation in monthly inflation readings as a sign that March might mark the peak for inflation, especially as year-on-year comparisons become tougher, the supply disruptions from Ukraine’s war have not been completely embodied in consumer prices yet, and therefore price indices will probably remain hot for an extended period of time. Consequently, the Fed could speed up its monetary tightening plans by delivering an aggressive 50 bps rate hike in May as it is already widely expected to do. But the crucial part of next month’s meeting will be the central bank’s forward guidance. If the war continues and the central bank judges that additional large rate increases will be required in the year ahead to achieve its symmetrical 2.0% inflation mandate in the medium term, then that could raise another red flag for stock markets and therefore for Bitcoin.

Otherwise, if the Fed puts the brakes to the tightening phase in the wake of a weakening economy, the crypto club could march higher instead.

BTC/USD levels to watch

From a technical perspective, the $37,500 – $34,000 zone is the nearest support zone. If it breaks down, the sell-off could stretch towards the critical $30,000 – $28,800 base, which has been intact since the end of 2020.

On the upside, a close above the 50-day SMA, which coincides with the 23.6% Fibonacci retracement of November’s downfall at $42,074, could confirm another bullish correction towards the 38.2% Fibonacci of $47,219 and the 200-day SMA at $48.163. Beyond the latter, the way might clear towards the 50% Fibonacci of $51,377.

免責聲明: XM Group提供線上交易平台的登入和執行服務,允許個人查看和/或使用網站所提供的內容,但不進行任何更改或擴展其服務和訪問權限,並受以下條款與條例約束:(i)條款與條例;(ii)風險提示;(iii)完全免責聲明。網站內部所提供的所有資訊,僅限於一般資訊用途。請注意,我們所有的線上交易平台內容並不構成,也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。

所有缐上交易平台所發佈的資料,僅適用於教育/資訊類用途,不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議,或是交易價格紀錄,或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。

本網站的所有XM和第三方所提供的内容,包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接,皆爲‘按原狀’,並作爲一般市場評論所提供,而非投資建議。請理解和接受,所有被歸類為投資研究範圍的相關内容,並非爲了促進投資研究獨立性,而根據法律要求所編寫,而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊,相關詳情請點擊 這裡查看。

我們運用 cookies 提供您最佳之網頁使用經驗。更改您的cookie 設定跟詳情。

風險提示:您的資金存在風險。槓桿商品並不適合所有客戶。請詳細閱讀我們的風險聲明