Bitcoin Records a Winning Streak, Moving in Opposite Direction of Stocks

Bitcoin made a positive start of the week, but it failed to last just as $11,000 failed to materialize.

The momentum in bitcoin and large caps seems to be fading, with September looking to end the month with over -8% losses.

The market seems to be in for a choppy month as both Bitcoin and Ethereum get subjected to the growing uncertainty over the upcoming elections in the US.

“Leverage and basis trading related flow will likely find it rather tough as an overextension is unlikely and instead it will be volatility traders that are expected to benefit the most over the coming months,” and digital currencies could struggle with direction, said Dennis Vinokourov of Bequant.

US stocks meanwhile jumped after four weeks of decline as the dollar weakened. Bitcoin’s decoupling from traditional assets, a $300 drop overnight, “may have trapped traders in long positions,” noted OKEx.

Banks are leading the S&P 500 Index after the gauge fell to its lowest since July last week. Signs of US politicians moving toward new fiscal stimulus while the Fed continues to provide liquidity has been working in favor of stocks.

“The Fed is making it almost impossible for you to get too bearish,” said John Porter, head of equities at Mellon Investments. “The market is getting more comfortable with the realization that COVID is going to be with us for a while now.”

Market Positioning

In the light of the ongoing boom across the DeFi ecosystem, mid-cap and small-cap coins are expected to decouple from the large-cap ones. But not all tokens are equal, and the market has become sophisticated in picking out the winners.

“Yield/farming craze is something that is expected to continue to attract hot money, and like with any hot money, there is always a risk of an aggressive pull back, as evidenced during the Sushiswap related drama earlier in the month,” Vinokourov said.

While the bullish view on DeFi is yet to falter, bitcoin price has set a record of daily closing above $10,000 for 65 consecutive days.

With this, the previous record set during the last stages of the bull run in Dec. 2017-Jan. 2018 has now been broken. Last time, this winning period led to an all-time high of $20,000 in two weeks, but this time BTC has been quietly holding the fort.

Meanwhile, in the futures market, the total volume remains low at under $10 billion, down from $28 billion earlier this month, while open interest remains under $4 billion since the week starting Sept. 21.

As per CME’s latest data, as of Sept. 22, leveraged funds had their long positions falling by 19% while short positions dropped by 14.2%. Long positions of other reportable accounts also fell but by just 4.4% while shorts by 25.4%, which is likely to be triggered by profit-taking activities.

This means, in the last reporting period, sharp price correction “triggered risk-control actions by institutional investors, and a large number of long positions were closed.”

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