Bitcoin wants to break up with stock markets after months of sobbing and temper outbursts.
The cryptocurrency is making one of its most determined attempts to separate from the tech stocks that have dominated its turbulent 2022 market.
Last week saw a decline in its 30-day correlation with the Nasdaq to 0.26, the lowest level since early January. A value of 1 suggests that the two assets are moving together.
Related: Bitcoin will rise in 2023, but be careful what you wish for.
The correlation, which measures how well the two move in tandem over a 30-day period, has been above 0.75 for the majority of the year and occasionally has been close to perfect synchronisation, reaching 0.96 and 0.93 in May and September respectively.
Some crypto supporters see any separation of Bitcoin from Big Tech as a sign of strength.
“Investors are seeking the next growing industry as the latter’s growth has somewhat peaked. One of the “next” growth businesses is bitcoin and cryptocurrencies, said Santiago Portela, the CEO of Web3 gaming ecosystem FITCHIN.
A year after the young cryptocurrency started its epic slide from the dizzying heights of $69,000 achieved in November last year, the fledgling uncoupling does actually coincide with a period of comparative quiet and consolidation.
In spite of the Nasdaq’s 2% gain last week due to gloomy quarterly results from Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Meta, and Amazon (NASDAQ:AMZN), Bitcoin has risen over 5% and is currently trading at one-month highs of over $20,500.
HODLERS RESISTING
But the recent winter has been a bitterly cold one.
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 players, who are digging in.
According to blockchain analytics company Glassnode, the dollar wealth held in bitcoins that hasn’t been moved in three months or longer is at an all-time high, indicating accumulation by long-term investors 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.
Related: Tesla, under Elon Musk, held onto $218 million worth of bitcoin in Q3.
Furthermore, analytics site CryptoQuant revealed that a record 55,000 bitcoins 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 who would not sell their BTC in almost any macro circumstance.”
“The market is now waiting for further confirmation of the risk asset/BTC link breakdown at the Fed meeting next week.”
What comes after fickle bitcoin?
Heavy withdrawals from exchanges, according to Samuel Reid, CEO of the research firm Geometric Energy Corporation, may be a sign that some significant buyers have “sniffed out” the conclusion of the bear market.
Nobody knows whether erratic bitcoin will begin to soar again, sink again, or quickly return 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 related to macro.”
It all comes down to: What are the use cases and what is the asset’s productive capacity? The more it is used for other purposes, the less dependent it will be on macro. “
