Analyst: BTC Trading like an Absolute Shitcoin; ‘Hedge Against a Mild Global Recession’
- Since the Coronavirus outbreak internationally, “Bitcoin has been mirroring the stock indexes, almost exactly,” – analyst Mati Greenspan
- Messari Crypto’s Qiao Wang says Bitcoin looks “depressingly correlated with S&P” and that biggest risk is “breaking the narratives”
- “Bitcoin market not positioned for a down move?”
Yesterday, the US Federal Reserve announced an emergency cut of 50 basis points for the first time since the 2008 recession. Although the stock market initially climbed up on the news, it soon fell. And bitcoin followed the stock market's lead. Mati Greenspan notes,
“Bitcoin has been trading a lot like a risk asset lately and ever since the outbreak of Coronavirus made the leap from China into an international issue, Bitcoin has been mirroring the stock indexes, almost exactly.”
Bitcoin does react to events beyond the immediate industry
Over the past week, crypto-assets sold off in line with risk assets amidst the news of coronavirus spreading out of its epicenter China and its economic implications.
However, Coin Metrics notes that during the times when the need for liquidity is high, safe haven assets like gold and bitcoin can also be sold since liabilities, including margin calls and debt service obligations like interest and principal payments, can be paid only in fiat currency.
Bitcoin did register gains after Bank of Japan among other central banks said they would take all the necessary steps to stabilize markets which,
“Add to the body of evidence that BTC and the broader crypto asset market do react to events beyond the immediate industry.”
The crypto assets recorded sharp declines but forced liquidations on crypto derivatives exchange BitMEX and other futures exchanges “remain modest” which is in sharp contrast to the pattern we saw last year.
The biggest risk is breaking the narratives
Qiao Wang, Head of Product at Messari Crypto also noticed,
Every short-term time frame I look at, be it 1 minute, hourly, or daily, Bitcoin looks depressingly correlated with S&P.
I'm not saying Bitcoin will necessarily get crushed by a mild recession, but you probably want to update your Bayesian probabilities.
— Qiao Wang (@QWQiao) March 3, 2020
The fact that bitcoin has been trading like an “absolute Shitcoin” over the last couple of weeks, Wang calls for “hedging against a mild global recession” those holding large amounts of crypto.
Although it isn’t that bitcoin will necessarily get crushed by a mild recession, it would surely get affected as we have been seeing.
— Ceteris Paribus (@ceterispar1bus) March 3, 2020
The biggest risk he said is “breaking the narratives (digital gold, halving rally, etc.) that took 10 years to form might set the entire industry back a couple of years.” However, he remains “incredibly bullish over a 5+ year time horizon.”
Futures market showing a grim picture
CME bitcoin volumes also share a similarly grim picture that says capital and focus is not on bitcoin currently. Bitcoin futures on the regulated platform have “collapsed” since the global market panic started.
— Alex Krüger (@krugermacro) March 3, 2020
Open interest and volume put/call ratio have also decreased to “historically low level” following the February expiry, notes Skew markets, questioning, “Market not positioned for a down move?”
Currently, bitcoin is trading around $8,760, up 0.08% in the past 24 hours. According to trader Nik Patel, the two possible scenarios for BTC price involves a sweep of yesterday's low and a close above it or reclaiming today’s open at $8,757 with a tight SL at today's low, expecting LOD to be in at that point.
Two possible scenarios I'm looking for to get long for a raid of the equal highs at $8970:
– A sweep of yesterday's low and a close back above it.
– Reclaim today's open at 8757 with a tight SL at today's low, expecting LOD to be in at that point. pic.twitter.com/DT0dSzkgMG
— Nik Patel (@cointradernik) March 4, 2020