Bitcoin market shares increased correlation with other risk assets, says Bank of America

Bitcoin market shares increased correlation with other risk assets, says Bank of America
image from medium.com

Key Takeaways:

  • Bitcoin market share could rise in confluence with other risk assets, based on an increased correlation.
  • S&P500 rose over 9% since bottoming on Jan. 22.
  • Bitcoin’s Mayer Multiple indicator suggests an uptrend.
  • Other bullish fctors, like whale and miner accumulation, confirm the forecast.

YEREVAN (CoinChapter.com) – A recent company report from U.S. financial gain Bank of America indicated the correlation between Bitcoin (BTC) and other risk-on assets such as the stock market (S&P 500), has reached a peak in late January.

Moreover, according to the study “Global Cryptocurrencies and Digital Assets,” the correlation has been ongoing since July 2021. In detail, the capital inflow into risk markets tends to rise against the growing inflation and destabilization of the U.S. dollar.

Also read: Bitcoin spikes above $41k as crypto market go green again.

Thus, considering the pandemic-related downfall of the global economy and the dollar from Mar. 2020 to May 2021, Bitcoin took on a role of a hedge against growing inflation, alongside equities, stocks, and the real estate market.

Risk assets on the rise

Several risk asset charts confirm the correlation mentioned above. The stock market, represented by the S&P500 (SPX) index, has been steadily rising since the collapse in March 2020 and increased 108%. Bitcoin, being much more volatile, grew over 1,000% in the same period.

Stock market on the rise. Source: SPX on TradingView.com
Stock market on the rise. Source: SPX on TradingView.com

Also read: If the dollar sinks, Bitcoin will recover, says FX analyst.

On a low time frame chart, SPX rose 9% since bottoming out on Jan. 24, following a bearish month. Meanwhile, the DXY (dollar strength index; orange on the chart above) stalled after a drop to 95.0. Moreover, the decline in trading volumes since the upside move could further indicate a holding incentive.

Bitcoin is catching up

Bitcoin has started its recovery on Jan. 22 as well, after holding support at around $34,000. In correlation with the S&P500, the alpha crypto put on nearly 30% since then and traded at $43,822 on Feb. 10.

Bitcoin (BTC) price chart Feb 10. Source: CoinMaketCap.com
Bitcoin (BTC) price chart Feb 10. Source: CoinMaketCap.com

Moreover, the “Mayer Multiple” indicator suggests a possible rise back to the 200-day average and beyond, which would confirm a bullish phase ahead.

Bitcoin chart, with a possibly bullish Mayer Multiple. Source: BTCUSD on TradingView.com
Bitcoin chart, with a possibly bullish Mayer Multiple. Source: BTCUSD on TradingView.com

In detail, the Mayer Multiple (MM) is a long-haul indicator, and it is NOT used for day trading and short-term moves. Instead, MM shows how the price compares to the 200-day average and what that relationship could suggest.

Also read: Bitcoin whales take a pause after accumulating the highest BTC supply per whale.

Simply put, when MM tops over 2.4 (red line), it is not the time to buy, as the price drop probability is very high. However, the Bitcoin market will favor the bulls, when the indicator is between 0 and 1. The latest bottom came on July 20, when the BTC price took off, and the MM bottomed at 0.66.

Considering the top on Nov. 9, Jan. 22 could constitute another bottom at 0.70. In that case, Bitcoin price is likely to be in a bull market after all.

Other bullish factors at play

Crypto analytical platform Ecoinometrics has detected heightened accumulation among wallets that hold a large number of BTC coins (whales) and small wallets (little fish). Ecoinometrics report tracked the size of an address and its behavior depending on the price swing vector.

As the infographic below demonstrates, whales and little fish maintained a sell-off incentive throughout December and January (hence the color blue). However, they picked up the pace by late Jan., and the accumulation rate hasn’t cooled off since (now red), as Bitcoin approached $45,000.

Also read: Bitcoin to be recognized as a form of currency in Russia.

Generally, accumulation is a bullish factor, and HODLing among miners confirmed the possible price increase. According to another analytical platform, Glassnode, miners have partially dumped their BTC in late Jan.-early Feb., after months of accumulation.

Miners possibly restarted the accumulation. Source: Glassnode.com
Miners possibly restarted the accumulation. Source: Glassnode.com

However, they picked up the pace again in anticipation of a price increase.

All the factors described above, from the bullish risk asset market to the accumulating miners, indicate a profitable phase for Bitcoin holders. However, cryptocurrencies are volatile, and it is advisable to “do your own research” before considering any investment and determining market entry and exit points.

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Bitcoin market, Bitcoin market shares increased correlation with other risk assets, says Bank of America

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