Bitcoin Consolidates After Rallying Past $42,000
This week started with Bitcoin making a strong move and surpassing the $42,000 mark. However, the cryptocurrency has entered a consolidation phase and is currently trading at around $41,762. Its market cap stands at $817 billion.
Bitcoin’s Correlation With Equities
Bitcoin’s impressive 150% gain in 2023 has led to a decline in its correlation with traditional equities. While global shares and bonds faced losses at the beginning of the week, Bitcoin demonstrated its resilience by surging 5.8%. This divergence highlights Bitcoin’s current low correlation with traditional macro assets.
Diminishing Correlations
Throughout this year, Bitcoin’s correlations with stocks and gold have diminished significantly. The 90-day correlation coefficient between Bitcoin and MSCI Inc.’s global shares index dropped from 0.60 to 0.18, while the correlation between Bitcoin and spot gold has declined close to zero from 0.36. These shifts indicate that Bitcoin is becoming a more distinct and less tethered asset in the financial landscape.
Bitcoin Open Interest Reaches Two-Year High
The open interest in bitcoin perpetual futures on the Deribit derivatives exchange has reached a yearly high of $740 million, a level not seen since November 2021 when Bitcoin hit its all-time high of over $68,000. This surge in open interest reflects increased participation and potential liquidity in the market.
Growing Institutional Involvement
The notable premium on CME bitcoin futures contracts and the all-time high in CME bitcoin long open interest held by asset managers indicate heightened institutional involvement in the Bitcoin market. This increased participation is likely influenced by the upcoming decision on spot Bitcoin ETFs, which is expected to occur by mid/end January.
Technical Outlook
On the technical chart, the current Bitcoin RSI stands at 76.5, indicating overbought conditions. If the RSI drops below 65, it could provide further momentum for the Bitcoin price to rally towards $50,000.
Hot Take: Bitcoin’s Resilience and Growing Interest
Bitcoin has shown its resilience by outperforming traditional equities and maintaining a low correlation with macro assets. Its diminishing correlations with stocks and gold highlight its evolving status as a distinct and less tethered asset in the financial landscape. Additionally, the surge in open interest and growing institutional involvement suggest increased confidence and interest in Bitcoin. With the upcoming decision on spot Bitcoin ETFs, we can expect further developments and potential price movements in the market.
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