Bitcoin Surges to 19-Month High Amid Global Downturn
Bitcoin (BTC) has shown resilience by reaching a more than 19-month high, even as global markets experienced losses. The cryptocurrency climbed 5.8% to reach $42,000 on Monday and maintained its position just below that level in morning Asian trading on Tuesday. In contrast, global shares and bonds have been struggling with losses since the beginning of the week.
Low Correlation with Traditional Assets
The current low correlation between cryptocurrencies and other traditional macro assets is evident in Bitcoin’s recent rally. Bitcoin’s correlations with stocks and gold have diminished as factors within the crypto market drove a remarkable surge in its value. The 90-day correlation coefficient between Bitcoin and MSCI Inc.’s global shares index has declined from 0.60 to 0.18 since the start of the year, while the correlation figure between Bitcoin and spot gold dropped close to zero from 0.36.
Regulation Impacts Crypto Market in the US
Regulation is another significant factor affecting the crypto market. Executives in the industry are optimistic that the worst of the US crackdown on the sector is behind them, leading to hopes for more constructive dialogues between regulators and industry participants.
Rally May Be Overextended
Technical indicators suggest that Bitcoin’s rally may have become overextended, with the 14-day relative strength index (RSI) above the overbought level. However, speculative interest persists due to predictions of US spot Bitcoin ETFs being approved by January and bets on future interest-rate cuts by the Federal Reserve.
Crypto Companies and Exchanges Experience Surge
Crypto companies listed in the US have seen a surge in their shares amid Bitcoin’s price increase. Popular crypto exchange Coinbase experienced a 7.3% surge before the market opened, while Microstrategy, a prominent Bitcoin investor, gained 8.2%. These positive trends reflect the growing interest and confidence in the cryptocurrency market.
Hot Take: Bitcoin’s Resilience and Low Correlation with Traditional Assets
Bitcoin’s recent rally to a 19-month high despite global market losses highlights its resilience and low correlation with traditional assets. While stocks and bonds have struggled, Bitcoin has continued to climb, showcasing its unique characteristics as an investment. The diminishing correlations with stocks and gold further emphasize the distinct nature of cryptocurrencies. As regulatory concerns ease and constructive dialogues between regulators and industry participants begin, the crypto market may experience further growth and stability. With continued speculative interest and positive indicators, Bitcoin’s rally shows no signs of slowing down.
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