BTC stocks correlation ‘not what we want’ — 5 things to know in Bitcoin this week

Bitcoin (BTC), which began the second week in April, is a whine as bulls struggle for support above $40,000.

After a weekend of refreshingly low volatility, the market nerves returned to normal and BTC/USD dropped in the last hours of April 10.

The average hodler feels like they are caught between two tables. While macro forces promise major trends shifts, they are slow to materialize. However, crypto assets are not receiving serious buyer demand.

However, insiders have no doubt about the future as demonstrated by the all-time high Bitcoin network fundamentals, and other evidence.

Combining these two opposing factors results in price action that doesn’t seem to know where it is going next. What is the likelihood of something changing in the next week?

Cointelegraph examines five possible Bitcoin price cues, as $40,000 is closer.

BTC has not experienced a “massive drawdown”.

April 11 begins with a $42,000 reclaim for BTC/USD. The pair briefly lost $42,000 overnight, as it fell into the weekly close.

Bitcoin hit $41,771 via Bitstamp, matching its March 23 levels.

BTC/USD 1-hour candle charts (Bitstamp). Source: TradingView

The largest cryptocurrency also lost all its gains over the past month to return to the top of last month’s trading range. This could be a retesting of the previous resistance as support. Many traders don’t fear the worst and are optimistic that there will be a reversal soon.

“Bullish test of flipped weekly levels, finex whale filling bidding, I’m purchasing the dip. Credible Crypto, a popular Twitter user wrote that you don’t have to wait until confirmation.

Credible Crypto commented on Bitfinex’s whale buying as well as new chart data showing that Bitcoin’s Aroon indicator had turned bullish in the recent days.

Aroon is a tool that helps identify uptrends and downtrends in assets. Since 2017, when Bitcoin crashed, Aroon only has delivered bearish-tobullish “crosses,” six times.

If you ask me, these are pretty good odds. Aroon’s behavior towards time rather than price makes it an exponential indicator as well as a smooth one. I don’t expect a huge drawdown.
— Otsu (@OtsukimiCrypto) April 11, 2022

Cointelegraph reported recently that Rekt Capital, a trader and analyst, had many reasons to believe Bitcoin is a bullish investment. The weekly close was $42,150. This is a far cry from his $43,100 goal.

He explained that a BTC Weekly Candle Close such as this would result in a retest of $43.100 to support new support. A chart was also provided on April 10.

According to the blue circle, BTC is in a position to move higher within the $43100-$52000 range.

Michael van de Poppe (Cointelegraph contributor) noted that the late dip of April 10 had closed any potential for CME Group futures gaps to provide a short term price target at the beginning of trading on April 11.

Stocks under pressure across the board

Stocks are facing a dark day, with Asia leading the way with large losses. This is due in no small part China’s recent COVID-19 lockdowns.

Morning trading saw a drop of over 2% for both the Shanghai Composite Index (SCI) and Hong Kong’s Hang Seng (HSG).

Europe’s markets had not yet opened at the time this article was written, but ongoing geopolitical tensions centered on Russia showed no sign of improvement.

One glimmering hope for the euro was the potential lead for incumbent French President Emmanuel Macron over rival Marine Le Pen in polls.

Analysts are also focusing on worrying trends beyond the immediate: rapid inflation, loss of bond markets and an apparent inability by central banks to react.

This week, the European Central Bank (ECB), will meet with a focus on inflation control — ending asset purchase and raising interest rates.

After the Fed’s rate-hike cycle began, the largest bond bubble in 800 years continues to collapse. This is ahead of next week’s #ECB meeting & rising #inflation shaking up bond mkts. Global bonds’ value has fallen by $960bn more this week, bringing the total loss to $6tn. pic.twitter.com/g78Pu2dyLo
— Holger Zschaepitz (@Schuldensuehner) April 10, 2022

This situation highlights the problems stocks and risk assets are facing in today’s economic climate. Commentators are unanimous in their belief that Bitcoin and crypto will be less popular due to the current inflationary environment.

Holger Zschaepitz, in a tweet last week, revealed that despite the gains in S&P 500, the Fed’s asset purchase means that progress has been flat since the global financial crises.

He wrote, “Just to be clear: While the S&P 500 may be at a new ATH today (or in relation to Fed’s balance sheet), it is trading at the exact same level in 2008 so equities are trading sideways since 2008, effectively counteracting the balance sheet expansion.”

Together?

Arthur Hayes, former CEO of BitMEX derivatives giant BitMEX believes that Bitcoin is still a safe place to store value in the face fiat failure.

Problem is, such a scenario doesn’t exist yet.

Hayes reiterated in his April 11th blog post that pain will precede gain for investors with high risk assets.

Future trends could see the United States dollar’s dominance shifted to other assets, by individuals and nation-states alike. However, crypto will still be impacted by macro forces.

Crypto’s growing correlation to central banks is a sign that stocks will fall as they act to combat inflation.

“The short-term (10 day) correlation is high and the medium-term (30-day and 90–day) correlations move up and to the left. Hayes argued against crypto correlations with the Nasdaq 100.

“In order for me to support selling fiat and buying cryptocurrency in advance of an NDX meltingdown (30% to 50% drawdown), correlations across time frames must trend demonstratively lower.”

Can equities see their value reduced by the Fed and its actions. Hayes said it would be anybody’s guess.

“Down 30%? […] 50% Down? […] Your guess is as good or better than mine,” he said.

“But let’s not forget that the Fed doesn’t plan to increase its balance sheet anytime soon. This means that equities aren’t going higher.”

Screenshot of the Federal Reserve balance sheet as at April 4, (screenshot). Source: Federal Reserve

Traditional markets are not as supportive of sentiments

It is not surprising that market sentiment is suffering from the macro gloom.

The Crypto Fear & Greed Index has returned to “fear” territory after sensing “greed” in crypto at the end March.

The metric is an analog to the traditional market Fear & Greed Index. It has lost half of its normalized score in less than two weeks due to cold feet returning traders.

On April 11, Crypto Fear & Greed was 32/100. Its traditional counterpart, 46/100, was considered “neutral.”

Van de Poppe reminded readers, whether deserving or not, not to trade based solely on sentiment cues.

He summarized, “Everyone was very bullish about the markets, but now they start to correct and the fear takes control.”

“The sentiment is not a good indicator of how you should trade often.”

Screenshot: Crypto Fear and Greed Index Source: Alternative.me

Faith is rooted in the fundamentals

This week, a familiar source offers a glimmer for hope. Despite all the price declines, Bitcoin’s network difficulties will only decrease by 0.4% over the next few days.

Similar: Top 5 cryptocurrencies you should be watching this week: BTC and NEAR, FTT, ETC and XMR

The most crucial aspect of Bitcoin’s self-maintenance paradigm is the difficulty. It will decrease from its all-time highs in order to reflect changes made by the mining composition.

This adjustment is small in size and suggests that miners are still financially healthy at current levels, despite the 10% BTC/USD drop last week.

Average chart for Bitcoin difficulty over 7 days. Source: Blockchain

Additional data supports this argument. The hash rate estimates for monitoring resource MiningPolStats are also at record highs.

Cointelegraph reported recently that mining continues to be a major source of investment. Blockstream announced last week that it will build a solar-powered mine capable of producing 30 petahashes per sec in hash rate.

Bitcoin estimated hash rate chart (screenshot). Source: MiningPoolStatscom. You should do your research before making any investment or trading decision.

https://cointelegraph.com/news/btc-stocks-correlation-not-what-we-want-5-things-to-know-in-bitcoin-this-week