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Bitcoin rebounded from Sunday’s lows of around $87,800 to nearly $91,000 on Monday afternoon.
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This move is not necessarily in sync with other risk assets, which is interesting for those paying attention to these correlations.
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Let’s dive into the key issues of correlation and what this means for Bitcoin’s development.
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When it comes to mission-critical cryptocurrencies, Bitcoin (Cryptocurrency: BTC) It must be the top token that investors are currently paying most attention to.
Whether it’s because of Bitcoin’s status as a portfolio diversification tool for investors of all sizes and investment styles, or because of Bitcoin’s importance to the functioning of the global economy, or to financial firms and other companies (including governments) that hold Bitcoin on their balance sheets, Bitcoin has many supporters. In other words, there is a lot of vested interest in keeping the price of Bitcoin moving higher in one direction.
Since Bitcoin is often viewed as an asset relative to other assets whose risk spectrum is more speculative, such as high-growth tech stocks, when the economy is booming, it’s typically a party time for Bitcoin investors.
Still, with sentiment waning recently, seeing Bitcoin fall back below the $90,000 mark, some investors are worried. The moves this weekend have been encouraging, with Bitcoin rebounding from Sunday’s lows of around $87,800 to nearly $91,000 as of 4:00 PM ET on Monday (a return of around 3.4%).
Let’s explore what’s driving this move and whether it’s sustainable.
Those who are bearish on the value that Bitcoin ultimately provides will harp on its lack of real-world use cases and the reality that Bitcoin accounts for roughly zero of the overall transactions facilitated in the U.S. economy. It’s also not a true store of value – an argument that has been undermined by very high beta volatility in the market, evident in other risk assets as well (but to a greater extent) in Bitcoin.
There have been some bullish catalysts over the past week, with several reports citing a surge in capital inflows into Bitcoin as a key driver of the coin’s recent price gains, while others focused on the liquidation of bearish perpetual futures (derivatives) bets. These two factors do affect the price of Bitcoin and are worth paying attention to.
However, the most prominent analysis I’ve read recently on Bitcoin suggests that it has a relatively high beta of over 0.5 (for a “store of value” asset) compared to the Nasdaq, suggesting that this is mostly a sentiment return rally at the moment. (A beta of 1.0 indicates that the two assets are moving in tandem, and 0 means there is no correlation at all, so Bitcoin’s beta indicates that the asset is somewhere in the middle of the range).
