Here’s Why This is the “Most Hated Crypto Rally”
The world's largest digital asset had a respectable rally last week that resulted in bitcoin recording 7% gains YTD . It’s been six weeks that bitcoin has been rising in a row while oil plunged 70% in the year-to-date and US equities -12% with gold making a positive recovery of +14%.
Bitcoin’s one-month volatility has also completely reverted to normal levels, now lower than oil and S&P 500.
In this tumultuous year, Bitcoin is gaining accolades as a stabilizing and maturing store of value, more likely to continue appreciating along with gold. Bitcoin volatility is lower than the world's most significant commodity, crude oil, and the lowest ever vs. the S&P 500. pic.twitter.com/3dxjCmNwhP
— Mike McGlone (@mikemcglone11) April 27, 2020
The most hated rally
April has turned out to be a good month for cryptos after experiencing violent sell-off last month. This month, Bitcoin gained nearly 22%, Ethereum 50%, Cardano 60%, Stellar 69%, and Tezos 72% which Jeff Dorman, Chief Investment Officer of Arca calls “the most hated rally crypto has ever experienced.”
The global equity market rally from 2009-2019, just after the financial recession, was often characterized as being “the most hated bull market ever” as well, noted Dorman. He said,
“Investors were so emotionally scarred by the events of 2008 that many sat out the largest wealth appreciation opportunity of their lifetime, waiting for lower prices that never materialized.”
Similarly, he thinks the psychological effects of March are causing crypto investors to miss out on what could be “the start of the largest rally they’ve ever seen,” and the one people have been waiting for years.
The ongoing surge in the crypto market is during a time when central banks have launched QE and printing money like crazy, as such,
“this rally has been fueled by new money, and a lack of sellers, not euphoria and leverage.”
“The perfect macro storm is now upon us,” added Dorman but feels people might keep on waiting for lower prices that may never materialize.
The Futures Market
As we reported, already retail investors and whales are busy accumulating but leverage that typically rises when investors expect gains are still near all-time lows. This means we haven’t seen peak buying yet.
Moreover, cash via stablecoins is still sitting on exchanges and this buildup has never been higher, “indicating that an enormous amount of dry powder still has not been spent.”
Currently hovering around $7,700, the next big level for BTC is the 200-day moving average that coincides with $8,000.
While a bullish structure is being spotted on Deribit options with “June 10k-12k call spread bought x500, financed by selling June 5k put x500,” futures market is “skeptical of a significant bullish run” with the curve constantly moving in and out of contango, “causing plenty of frustration for market participant,” said Denis Vinokourov of Bequant.
I am all for a healthy correction eventually, but you can not trade on that.
Right now it seems that in the long and short term the market is positioning for more downside.
Skew and Futs term structure in backwardation.
— Cantering Clark (@CanteringClark) April 27, 2020
In less than two weeks now, Bitcoin will go through its third halving. While the flow of bitcoin will be cut down in half, the breakeven cost will double which will momentarily cause some miners to exit and difficulty to adjust which could bring back volatility.
However, ahead of this, over 43% of all circulating bitcoin supply hasn’t moved for at least two years while more than 22% of the supply hasn’t been moved in over 5 years.