FX.co ★ Bitcoin: Big buyers sniff out the end of the bear market

Analysts at Reuters have noticed that bitcoin, which has been closely correlated with tech stocks for much of its 2022, is making one of its strongest efforts ever to pull away.

Its 30-day Nasdaq correlation slipped to 0.26 last week, its lowest level since early January, with a reading of 1 indicating the two stocks are moving in sync.

The correlation, showing the extent to which these two assets are in sync with each other over a 30-day period, hovered above 0.75 for most of the year, and at times approached a perfect unison of 0.96 and 0.93 in May and September.

For some crypto proponents, any breakaway of bitcoin from Big Tech is a sign of strength. The emerging discorrelation indeed coincides with a period of relative calm and consolidation of the main cryptocurrency.

Bitcoin is currently hovering around a one-month high and has risen more than 5% in the past week, surpassing the Nasdaq's 2% gain.

Crypto winter losses

According to CoinMarketCap.com, the total market capitalization of cryptocurrencies has shrunk by more than a third to $984 billion from almost $3 trillion in November 2021.

Market participation has also dwindled, with average daily trading volume for digital assets falling to $61.3 million as of October 25. This is a far cry from the $700M daily volume seen last November, data from CryptoCompare shows.

However, months of persistent selling have not been able to get rid of the old hands that continue to hold the tokens despite the gloomy economic background.

According to Glassnode, the dollar equivalent held in bitcoin, which has not been traded for three or more months, is at an all-time high. This indicates accumulation by long-term holders or "HODLers" (the name of this group of diehard crypto investors appeared several years ago when a trader misspelled the word "hold" on an online forum).

In addition, a record 55,000 BTC, according to analytics platform CryptoQuant, was withdrawn from Binance on October 26th. These flows usually signal that coins are being moved to wallets for longer storage.

"The base of BTC holders has changed dramatically from the heavily speculative ones who mostly came in 2021 to an almost iconic "HODLer" community that won't sell their BTC under almost any macroeconomic circumstance," stressed Stefan Ouellett, CEO of the provider crypto derivatives FRNT Financial.

"Now the market is looking forward to next week's Fed meeting to further confirm the disruption in correlation between risky assets and BTC."

Big buyers sniff out the end of the bear market

Samuel Reid, CEO of consulting firm Geometric Energy Corporation, issued a statement saying that significant capital outflows from exchanges could potentially indicate that some big buyers are sniffing out the end of a bear market.

However, one can only speculate whether bitcoin will start to rise, or quickly return to being correlated with tech stocks.

For the foreseeable future, macroeconomic factors will continue to drive a market that is highly speculative in nature.

"The more speculative a cryptocurrency is, the more connected it is to the macro economy," said Alex Miller, CEO of blockchain firm Hiro Systems.

"It all comes back to what are the use cases and what is the production capability of the asset? The more it is used for other purposes, the less it will be tied to macroeconomics."

Glassnode: the bottom just needs to be broken

As market participants wait for tomorrow's FOMC meeting, the analysis of the network conducted by Glassnode shows that the bottom just needs to be broken.

In its weekly report, the firm states that a number of indicators are currently rebounding, which is a relatively consistent argument that the bitcoin market has bottomed out. In this regard, the current "almost textbook" numbers are comparable to the lows of the previous cycle.

To confirm the claim, Glassnode checks against the Mayer Multiple and the realized price. The last of the two metrics calculates the purchase price per coin. This allows you to determine if the overall market is showing an unrealized loss, as is the case when the spot price is below the realized price.

The Mayer Multiple helps evaluate overbought and underbought conditions. It displays the relationship between the BTC spot price and the 200-day simple moving average. The latter model is widely used in traditional financial analysis. Gassnode writes that this pattern is repeating in the current bear market, with the June lows trading below both patterns for 35 days. The market is currently approaching the bottom of the selling price at $21,111, where a break above would be a visible sign of strength.

Bottom formation takes time

The third metric considered by Glassnode is the fair value model. This is the difference between the realized price and the transferred price. The "fair value" is currently hovering around $16,500.

As noted by Glassnode, in past cycles, the price of bitcoin fluctuated between the realized price and the balanced price for 5.5 and 10 months before breaking out.

During the bear market of 2014 and 2015, the price of BTC stayed between the two for 10 months. In the bear season 2018/2019, it was only 5.5 months. If history repeats itself, the bear market will continue a little longer.

Another characteristic of the formation of the bottom is the constant change of owners of bitcoins. This behavior of investors can be analyzed by tracking the distribution of realized UTXO prices (URPDs). According to Glassnode, the proportion of shipments that have changed hands is significant, but perhaps not enough.

During the 2018-2019 bottoming period, about 22.7% of total supply was in a range when the price first broke below and above the realized price.

The same analysis from 2022 shows that only about 14.0% of the supply has been reallocated in this range to date. So this metric also suggests that "an additional phase of redistribution is needed" before the bottom finally hits.

At the same time, however, the research firm warns that there is currently "no convincing influx of new demand." However, the company is optimistic and says that it looks like the transition from bears to bulls has not yet formed, however, it seems that the process has already begun.

BTCUSD was trading between the $20,000 psychological support and the 20,700 resistance.

Bitcoin will rise above $63,000 by the next halving

The other day, James Mullarney, host of a popular cryptanalytic channel, explained why he expects the price of the main cryptocurrency to exceed $63,000 by the next halving, which, in his opinion, could happen as early as March 2024.

"Historically, bitcoin starts to rise 15 months before the next halving. The next halving is expected in April or May 2024. There are many rumors that this could happen in December 2023, depending on the actual block times, if it is less than 10 minutes. I'm still sticking to the April 2024 time frame."