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Bitcoin, Correlation to Stocks is Breaking Down

Bitcoin is up + 2% today and +83% YTD. DJIA is -2.5% today and -2.4% YTD.  SPX is -2% today and +5% YTD.  Nasdaq is -1.45% today and +32% YTD.  The chart below shows the ATH in the red circle and where Bitcoin is trying to get to.  Thanks to Jason Williams on the chart.  

It is obvious to Neutral ATM that Bitcoin is in a bull/bear battle right now.  There are powerful shortsellers trying to drag the Bitcoin price down.  Future’s market is one culprit.  Whales do this as well.  However, the bulls have been winning out and as the volatility and trading volume go down the chance for a volume supported break out goes way up.  This week it is likely Bitcoin hits $14,000 but not today!  To many short sellers today!  

Here is another chart below showing us the correlation to the SPX over a 30 day average has dropped to zero.  As this bull market moves forward maintaining this low correlation will be paramount.  Thanks to A. Pompliano for this chart.

Neutral ATM believes this break is a requirement for Bitcoin to hit the target numbers.  What will drive the break in this correlation to remain.  Well, all the stock market indices are due for a break down unless a stimulus deal is reached.  If that does not happen then this correlation break will stay low.  If a stimulus deal is reached the correlation may pick up for a little while longer.  The other factor in breaking this correlation long term will be demand for Bitcoin continuing to rise as the amount of Bitcoin produced per day is stuck at just 900 bitcoin daily.  Institutional demand is very high for Bitcoin as it is a very proven store of value.  Even if the stimulus gets passed and stocks rally again, demand for Bitcoin is still high and growing since investors know very well, that stocks are propped up by the Fed and the USD is being debased.  As the DXY falls lower even if stocks remain strong as they have so far, demand for Bitcoin will rise much higher.  The bears will only be able to hold off Bitcoin for so long.  It will break up not down when it does get the next break out.  This bull market is well confirmed.  Another macro economic outcome that is quite possible is a deleveraging event whereby stocks fall off and the DXY climbs up due to panic in the markets, people going back into the dollar.  That will hurt Bitcoin for a while but the overall macro back drop will still prevail and demand will drive Bitcoin up still further while stocks remain more neutral.  This deleveraging event, if it occurs, would also lower the stock correlation to Bitcoin.  Stock markets remain a higher risk in this environment than Gold and Bitcoin.  This risk is a wide margin, stocks are extremely high risk right now!  Sticking to Bitcoin is also a lower risk than the alt coins.  We will keep watching Theta but the risk for a trade into Theta is high.  Neutral ATM remains on the sidelines for that.  We continue to believe Bitcoin, Gold, Silver, Real Estate, and Etheruem, Fine Art, or even Digital Art are the safe haven investments for the forseeable future.

Neutral ATM is here to get everyone off of zero Bitcoin.


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