Bitcoin Revisits Previous Lows
Yesterday, we saw quite a significant dump for BTC as the CPI figure came out. Yet another disappointing outcome, as inflation stubbornly refuses to budge.
As I have said, expect to see the $19K support being lost. It won’t be long before this enormous pocket of liquidity gets plundered by the whales. This is a waiting game.
With inflation sitting at 8.2% after numerous rate hikes, it is rather concerning, as there appears to be no headway being made. As with most market dynamics, rate hikes will require some time before the effects begin to manifest in the “numbers”. However, one would have expected some positive signs by now. The reality few seem to want to accept is that this system has been taken beyond a point of return, at least a return to normalcy. It’s a broken system that can never operate as it once did, and even that was not great. The irony in this story is rather sad, as Bitcoin was created as an alternative, and yet it has fallen prey to association.
Bitcoin has been considered a risk-on asset, similar to tech stocks, and other risky investment vehicles. Wall Street plays the Crypto game with this perspective, which is not good for Crypto. Bitcoin is similar to a unique sea creature that has been caught up in a trawler’s net. This correlation with the traditional market exists, but that does not necessarily imply that it should exist. I have based much of my analysis over recent months with this correlation in mind. Others have chosen to ignore how significant it is and how it can affect the performance of the Crypto market.
How It Currently Operates
In a recent article, I addressed the two aspects of this correlation. Namely, direction and velocity. I presented data that clearly displays how Crypto is unhindered by the traditional market in a bull run. I would think that a flat traditional market would also pose little threat to Bitcoin edging higher. However, a bearish market is another story because the directional correlation still applies. This is why a bottom in traditional markets could spark a rally a lot stronger than many anticipate, myself included.
Once downward momentum ceases, the velocity dynamic of the current correlation will shift gears and push higher. This is if things remain as they are, in terms of correlation to traditional markets. This is why I have insisted that Bitcoin is unable to move significantly higher at this stage of the game. While traditional markets fall, the directional correlation utilizes the velocity dynamic as a destructive force.
A traditional market that moves sideways, or even modestly upwards, can no longer drag Bitcoin lower. The velocity dynamic can now take the driver’s seat. I don’t know how long this correlation will be in place, but I firmly believe that if Bitcoin is to go on to realize its full potential, it must decouple more significantly. I believe it will happen once market participants begin to accurately interpret Bitcoin. Once they realize that it is unlike what it is correlated to. We have to also consider that these are rather bleak times, and many are more susceptible to negative and bearish viewpoints.
A Unique Monetary Policy
To consider that BTC is so heavily affected by these outside dynamics reveals a need for further education of the masses. At least the maxis are doing some good. Understanding that Bitcoin’s monetary policy cannot be affected by outside forces or manipulation should hold greater value. Bitcoin is currently similar to a V8 engine in golf. Association has caused onlookers to think and believe that it is just like the assets it is being correlated to. This is, however, far from the truth, and yet simultaneously a reality. It is only a reality because the truth is still being masked. It won’t stay this way forever. However, we can only speculate as to when we can expect a significant decoupling.
I will most likely be keeping a closer eye on this, watching for signs of its arrival. Yesterdays’s surprise bounce from $18.012 is not actually as significant as some would like to believe. It was merely an echo of what transpired in traditional markets. It is also not going to be an isolated event that signals “change”. Dynamics need to shift, which requires a bit more than Bitcoin experiencing a few isolated price movements.
Anyway, I firmly believe it will happen at some point. Currently, I cannot say when, but it may be sooner than expected. The world needs something reliable, and it will eventually single out an asset. Once people understand the dynamics and monetary policy of Bitcoin, I don’t see how they are going to find a better candidate. In my mind, it’s just a matter of time. Until then, we work with what is at hand, in terms of market dynamics. Signing out, see you next time!