Insights on the Crypto Down Cycle: Edition #7



As we said in our previous post, the local spike of $BTC on 30th and 31st May was indeed sold very quickly, which moved the price from $32k to $29.5k. It regained the $30k level afterward probably thanks to support from the recovery of risk assets in the Equity markets. Today it has moved to $31k+, again with other risk assets also moving up.


Last week, Arthur Hayes’ (co-founder of the futures exchange BitMex) regular blog post made a case for a bottom in $BTC and $ETH price.  (Read blog His reasoning was around the crypto price cycle with the US midterm elections being the catalyst later this year. While we don’t necessarily share all of his views, we found some of the charts in his post interesting as we are also looking at the same thing, namely the crypto / NASDAQ decorrelation.

The charts below show the Bitcoin / NASDAQ correlation with 10, 30, and 90 days rolling windows. (extract from Arthur’s post – from Bloomberg screens).


During the last sell-off, it was clear that crypto started to move on its own. This time Equity was up and crypto was down. The charts above also suggest what we notice in the markets in real-time. That the correlation between Bitcoin/NASDAQ might have peaked.
Recently, the correlation between Bitcoin and NASDAQ has become weaker gradually. If there is a trend (correlation is known to be very noisy, so this is a big “if”), we think the correlation will trend towards zero by July this year.

In our chart below, the downside beta between Bitcoin and NASDAQ and its linear trend:

We maintained our view that $BTC will likely move in a range while the market is finding the bottom. Hence there will be a time when we will find out the true bottom. However, we think it’s time to pay attention again to the crypto market. The crypto market will be very sensitive to liquidity conditions changes or the emergence of new narratives. In the short term, we think the rally is for selling into rather than building up a large position.
End of the issue today. Thank you again for your participation
Next issue, we will likely present some of the interesting on-chain indicators which are useful to spot bottoms.

Published on June 6th, 2022/

***Disclaimer: views given in this channel are for informational purposes only and are not financial advice.
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