Bitcoin (BTC) investors believe the price has bottomed out, but it’s also vital to evaluate BTC’s relationship to the stock market. In this article, let’s take a look at analyst Marcel Pechman’s market analysis to discover whether $34,000 is bottoming out. As Kriptokoin.com, we provide the details…
The data shows that it is premature to say that the price is bottoming
The first point to consider is whether cryptocurrencies are overreacting compared to other markets. Bitcoin’s volatility of 62% per year is much higher than traditional markets.
Bitcoin, the Hang Seng exchange, and the Russell 2000 Index in the US all have a strong link. The Fed’s tightening policy in the US may be a separate reason. The monetary authority ignited the “flight to safety” response by limiting bond buybacks and threatening to raise interest rates. Despite non-existent returns when adjusted for inflation of 7.5%, investors often look for security in cash US dollar holdings and Treasury bills. This is especially true in times of great uncertainty.
Bitcoin futures moderately bearish
Bitcoin derivatives can be watched to see how professional traders are positioned. The annual premium on Bitcoin futures should be between 5% and 12% to compensate for investors “locking up” their money for two to three months until the contract expires.
Levels below 5% show extreme decreases, while annual premiums above 12% show an increase. As shown above, the futures premium fell below 5% on February 9, indicating a lack of confidence from professional traders. Although the current 2.5 percent rate is the lowest since July 20, it marks the end of the 74-day price correction. This event was followed by a 71% gain, confirming the notion that the futures premium is a retrospective indicator.
On July 20, the correlation between Bitcoin and the Russell 2000 Index was relatively high. However, the situation quickly reversed as BTC started to rise independently of established markets.
Even though the bottom has been reached, uncertainty can lead to further losses
Like the futures premium, the correlation statistic is based on historical data and should not be used to predict trend reversals. During market turmoil, investors, especially professional fund managers, prefer to avoid assets with high volatility. Understanding market psychology is critical to avoid unexpected price movements. As a result, as long as market participants view Bitcoin as a dangerous asset, these short-term dips should be the rule rather than the exception.
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