Bitcoin stock performance over the past few days has been significantly better than that of almost every traditional asset. Observers believe the cryptocurrency has maintained its stability despite the recent resurgence of volatility in traditional markets due to the absence of prominent sellers, continued holding by long-term investors, and quarterly options expiration.
Bitcoin Stock Performance
Since the Federal Reserve increased the cost of borrowing money in the United States by 75 basis points a week ago. The value of the dollar index increased by 4%. The value of the S&P 500 decreased by 6.4%, and the British pound reached a new all-time low concerning the value of the American dollar. On the other hand, the price of bitcoin has remained stable between $18,000 and $20,000.
Mike Alfred, a value investor and the founder of Mike Alfred and Company, stated, “I think what we’re seeing is more of a lack of large sellers, rather than a plethora of large buyers.” the digital assets investment platform Eaglebrook Advisors said. “There are no large sellers left. Forced selling has already occurred.”
According to Alfred, the structural correlation between bitcoin and traditional assets such as stocks, bonds, and the dollar index is not present over long periods for bitcoin. This indicates that there is no reason to continue selling the cryptocurrency that has already been battered, even as traditional markets continue to swoon.
In November, the price of bitcoin stock reached its all-time high of $69,000, but it has been steadily declining since then. As a result of Terra’s failure, the price dropped by 56% in just the second quarter alone, wiping out billions of dollars worth of investor wealth.
It would appear that major market participants have halted their selling activities, as the number of bitcoin stock held by funds has remained relatively stable.
Since June, the number of coins held by U.S. and Canadian closed-ended funds and Canadian and European exchange-traded funds (ETFs) has fluctuated between 833,000 BTC and 842,000 BTC, according to the data that ByteTree Asset Management tracks.
According to blockchain analytics firm Glassnode, the relatively stable price of bitcoin stock can be attributed to a “full detox of speculative interest” and the refusal of long-term investors to give in to pressure and sell in an environment with weak macroeconomic conditions.
Glassnode’s analysts wrote in the most recent edition of the company’s weekly newsletter that “the dominance of mature coins being spent has collapsed from an exuberant 8% at the height of the bull in January 2021, to a distribution of just 0.4% of all volumes.” “This hints that the group of investors holding older coins is holding firm, and they are not planning to spend or sell their holdings on any meaningful scale.”
According to Glassnode’s definition, mature coins are those that have been dormant for a period of at least half a year.
According to Griffin Ardern, a volatility trader at the cryptocurrency asset management company Blofin. The quarterly options expiry due this Friday may also be helping the cryptocurrency remain relatively resilient.
According to Ardern, “ahead of the expiry, the spot price tends to be as near as feasible to the max pain,” She said that the peak pain for bitcoin stock is $22,000.
The maximum pain level refers to the strike price at which most open options contracts will become worthless upon expiration. According to the theory, the maximum pain point is a magnet for spot prices as the expiration date draws nearer. This is because option sellers, primarily institutions, will sometimes attempt to drive prices closer to the maximum pain to inflict the maximum loss possible on options buyers.
According to one view, the recent drop in the value of fiat currencies such as the Chinese yuan, British pound, and Japanese yen may have contributed to increased demand for bitcoin stock. In the past, Chinese investors have moved their money into assets abroad through the use of cryptocurrencies to avoid the effects of local regulation and currency depreciation.
The story is supported by circumstantial evidence, although it is difficult to show that European investors are engaging in the same activity right now.
Ilan Solot, a partner at Tagus Multi-Strategy Fund, stated in a daily market report that “flows into digital asset investment products were lukewarm last week ($8.3 million), albeit with some noticeable geographical disparities.” “The amount of money that left North America was $9.4 million, whereas the amount that entered Europe was $15 million. Could this be the first piece of the puzzle that explains the current strength of cryptocurrency markets? Too soon to say.”
Although bitcoin stock has maintained its strength thus far, its near-term prospects are still dependent on macro variables and more traditional markets. To put it another way, the cryptocurrency market is still susceptible to a further decline in the S&P 500, higher rates, and an ongoing tightening of liquidity in dollars.
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