Bitcoin Back Above $11,000, in ‘Strong Negative’ Correlation with US Dollar
And BTC is back!
Markets have been trading cautiously, with small-cap cryptocurrencies underperforming the large-cap ones and the DeFi sector bleeding, with Curve (CRV) being the most notable one thanks to its -99% decline since hitting the peak in early September.
This has been up until yesterday when bitcoin suddenly saw a burst of momentum, taking it to nearly $11,000.
And today, BTC/USD actually surpassed $11,000.
“The crucial breaker is $11,150. If that breaks, I'll anticipate an acceleration towards $12,000 said trader Crypto Michaël.
However, this pop up in crypto markets wasn’t reciprocated in traditional assets. The surge was the result of Square becoming the second public company to invest 1% of his company assets in Bitcoin.
With this, it can be expected “the treasury management panic buying commences.”
Some hopium for tonight. If everyone does what Square does, ie, put 1% of their net worth in BTC, then BTC will be worth about $4T. Or $200k per coin.
— Qiao Wang (@QwQiao) October 9, 2020
This news also drove the short squeeze on bitcoin, which along with stocks, were “on the brink of squeezing higher,” noted trader and economist Alex Kruger.
While in the short-term, this move has us back to Oct. 1st level, in the long term, the move is barely noticeable where we “continue to track an ever-tightening consolidation wedge.”
The psychological barriers to focus on are $11,000 and $12,000.
Capital Flow Waiting on the Sidelines
Meanwhile, Bitcoin’s future curve remains relatively flat, despite the volatility falling to a three-year low and expected to return to the forefront. However, this resilience bodes well for Bitcoin.
“Around $25b of capital needs to flow into Bitcoin to push it to $1T market cap, which will bring it into visibility as a major asset bucket. Today $18.3b sits in USDT and USDC alone, that's even if we ignore new participants preparing for their entry,” noted on-chain analyst Willy Woo.
The question for bitcoin should not be if to be long, flat or short, but rather *how long*.
The same applies to stocks and precious metals.
— Alex (@classicmacro) October 8, 2020
Unlike the price, the hash rate of the bitcoin network has made a new high. Bitcoin hash rate hit a new ATH at 170 exahash for the first time in history on the hourly chart (24h MA), increasing about 40% since the halving in May — substantially adding to the security of the network.
Trumping Cash with Strong Negative Correlation
After falling earlier this week, the S&P 500 has been moving towards its all-time high hit in early September and 3.8% away. Gold has also moved back above $1,900.
Meanwhile, the US dollar index loses its strength at around 93, which is in “strong negative correlation” with Bitcoin.
“Bitcoin is now strongly correlated to the dollar. This is not a fluke. Macro traders jumped on the bitcoin as macro asset bandwagon in 2020, and by doing so, turned it into one. The market changed. Being strongly bullish both bitcoin and the dollar makes little sense,” said Kruger adding, “Cash is trash will likely be the trade of 2021.”
22% of all US Dollars were created in 2020
— ₿itcoin & ₿ooks (@readmorebooks__) October 6, 2020
This makes sense, given that governments are depreciating the fiat currency's value by continuing to print and more and more of it.
Interestingly, after calling off the negotiations with Democrats only to backtrack, President Donald Trump is now yet again leaning towards a large-scale stimulus bill.
If Trump approved a $10 trillion stimulus package, I'm selling my kidney to buy more Bitcoin https://t.co/iCtYOdE1dk
— Pomp 🌪 (@APompliano) October 9, 2020
Treasury Secretary Steven Mnuchin reportedly told House Speaker Nancy Pelosi that Trump wants agreement on a comprehensive stimulus package. Meanwhile, White White House spokeswoman Alyssa Farah said, “we’ve made very clear we want a skinny package,” only to clarify that the administration is “open to going with something bigger.”