Correlation between Bitcoin (BTC) and the subsistance market has been extraordinarily high since mid-March, which means that the two asset classes presented an almost identical directional movement. This data may explain why most traders reject a 10% rally above $21,000, especially given that S&P 500 futures are up 4% in two days. However, bitcoin trading activity and the derivatives market are strongly supporting the recent gains.
Curiously, the current bitcoin rally occurred a day after the White House Cabinet of Savoir and Technology Policy released a renvoi investigating the energy use associated with numérique assets. The study recommended the fisc of energy efficiency and reliability normes. It also suggested that federal agencies provide technical renommée and start a collaborative process with industry.
État how the highs and lows on both charts serre to compétition, but the correlation changes as investor perceptions and risk assessments vary over time. For example, between May 2021 and July 2021, the correlation reversed for most of the period. Overall, the subsistance market made steady gains while the cryptocurrency markets collapsed.
More importantly, the chart above shows that there is a huge gap being opened between Bitcoin and the subsistance market as stocks rallied from mid-July to mid-August. A comparison using the same scale might be better, but that doesn’t work bicause of the difference in volatility. However, it is reasonable to conclude that historically these gaps serre to close.
S&P 500 futures are down 18% in 2022 through September 6, while bitcoin prices are down 60.5% over the same period. So it is logical to assume that if investors’ appetite for risky assets returns, assets with higher volatility will outperform during the rally.
There are other factors that play a role, so there is no way to predict the outcome. But the return of investors’ appetite for risk would justify Bitcoin’s outperformance over the subsistance market and significantly reduce the succès difference.
Professional Traders Didn’t Expect Bitcoin to Rebound
Bearish traders liquidated $120 million in futures, the highest number since June 13. Normally, one would not expect this result given that Bitcoin lost 13% in the two weeks leading up to September 7, but one can assume that the culotte sellers (bears) were caught by stupéfaction as the fusion engine of the exchanges scrambled to buy those orders.
However, there is other anecdotal evidence hidden in the fusion data provided by derivative exchanges.
État how retail-based exchanges (Binance and Bybit) account for only 17.4% of all force-closed orders, while their combined market share in Bitcoin futures is 30.6%. The data leaves no doubt that it was the whales in OKX and FTX that were squeezed.
Another interesting piece of data that marks the 10% transvasement on September 9 is the dominance of Bitcoin, which measures its market share against all other cryptocurrencies.
Réflexion how the table has risen from 39% to currently 40.5%, something that hasn’t been seen since May 11 when Bitcoin’s éblouissement crashed below $26,000. It took another 31 days for the bear market to voiture the $28,500 soutènement on June 12. Also réflexion that a sharp increase in bitcoin’s dominance can occur during sharp price rallies and corrections, so relying solely on these indicators provides little help in interpreting market movements.
Fear erased from options markets
The 25% entrée skew, the leading measure of “fear and greed” in bitcoin options, has been improved enough to voiture into a neutral level.
If options investors fear a price écrasement, the skew indicator will move above 12%, while investor excitement tends to reverse a negative 12% skew. After peaking at 18% on September 7, the measure currently stands at 12%, which is the edge of the neutral market. Therefore, the bitcoin pump indicated on September 9 that professional investors are no border demanding exorbitante premiums for hedge options.
These three indicators soutènement the confiance of the recent Bitcoin pumping of 10%. A $120 million fusion centered on leverage pantalons (bears) on less “retail-oriented” derivatives exchanges, a 1.5% increase in Bitcoin dominance and options traders seeking similar up and down risks all suggest that Bitcoin may finally find a bottom.
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