Just like last week, bitcoin has started the week on a positive note. We are back above $9,400, with 0.75% gains but on the back of meager “real” volume. In the past 24 hours, just $900 million worth BTC exchanged hands.
Last week, bitcoin started around $9,300 and printed gains earlier in the week to top out just above $9,500. The week ended below $9,300. It’s to be seen if we will have a repeat performance.
A surge in volatility if expected soon as declining volatility has resulted in a bout of volatility in the market, which could be as early as today or in a couple of days. Moreover, this week, 60% of all bitcoin options, close to $1 billion, are expiring.
— jb (@blackswan0815) June 21, 2020
This lack of volatility has traders scalping, a trading strategy in which traders profit off small price changes in an asset. Economist and trader Alex Kruger shared that out of his 192 trades last week involving “heavy scalping and trading around positions,” not a single one was BTC.
“That's how uninteresting it got, he said, adding, “No point in bitcoin when moving that aligned with everything else.”
However, he is still “long and bullish bitcoin. I think it calls for patience.”
Bitcoin Not an Uncorrelated Asset
Kruger’s views about bitcoin have been mostly unchanged since early May, the period during which bitcoin has been ranging. According to him, we need to give the world's leading cryptocurrency time to go up, which it should like everything else. But “if it doesn’t, it would be a major failure,” he said.
Analyst PlanB, who is known for applying the stock-to-flow model to bitcoin, also pointed out that bitcoin is correlated (95% R2) and cointegrated with US equities (S&P 500) which means the digital asset is “not an uncorrelated asset” and is “supported by FED actions.”
“Don’t Fight the FED” is old Wall Street wisdom. Great thing that Bitcoin is fully aligned with FED interests (QE to save banks & companies),” said PlanB.
It implies that when the S&P 500 goes 2x, Bitcoin goes 416x based on the formula BTC=exp(-60)*S&P^8.7.
This also means bitcoin will crash hard just as the US stock market if the Federal Reserve stops printing money. It happened in November 2018 when the Fed tried to end QE, and “the effect on S&P and BTC were similarly disastrous.”
“FED will never do that again. IMO there is no turning back; it is QEternity,” added PlanB. Moreover, “the upside (416x) is more than the downside can ever be (-100%).”
For now, the market is not sure which way bitcoin will move. Based on technicals, Kruger favors a move down to $8,400-$8,100 only to make its way back to the averages, before continuation higher. His area of interest is $7,700-$7,800.
This environment is expected to be “great” for mid and lower-cap altcoins, which could record another leg upwards.
Now that the breakout retest is complete, “if BTC is going to be sent for one last scamp pump, its gonna have to be from here,” said analyst Benjamin Blunts.