Welcome to the second edition of the Bitcoin Moves weekly market report. At OKCoin, we’re watching the markets closely: while BTC has been slow, decreasing ~0.4% over the past week, the hashrate and rate of difficulty have hit all-time highs and miners appear bullish.
Here’s your market snapshot:
Bitcoin price movements
- Current BTC price: USD $9236 (live at OKCoin.com)
- 24hr high: USD $9325
- 24hr low: USD $9110
- 24hr change: +2.3%
- 24 BTC volume sits around USD $19 billion
- 30 day high / low: USD $9,680 / $8,975
- 90 day high / low: USD $10,199 / $6,555
- Bitcoin Volatility Index (BVI), 30day: 0.864
- Hashrate: 124.29 EH/s
Is bitcoin correlated to the stock market?
Correlation is a comparison of the movement of price between two assets or indices. Determining the strength of the relationship between bitcoin and the S&P allows investors to assess whether asset price movements are connected and if there is causality between the two measures. It also provides a reference point for assessing impact of market conditions like macroeconomic pressures, volatility, and investor sentiment for assets based on contrary fundamentals.
So, are BTC and the S&P correlated?
In 2020, bitcoin displayed a high correlation to US equities after global markets experienced turmoil, increasing from mid-March through April, peaking at a measure of 0.36 on April 29th. Since then, we have seen moderate correlation, which today sits at a measure of 0.19, according to Coinmetrics.
Alongside drops in equity and bond markets, the price of bitcoin experienced a significant decrease on March 12th, falling ~50%. We previously noted that speculators cited bitcoin’s liquidity as a reason for its decrease; investors couldn’t find liquidity in other markets, but were able to liquidate their BTC positions in order to cover traditional asset losses.
While it seems that speculators typically view BTC and SPX as ‘decoupled,’ effects from global economic turmoil and coronavirus have impacted bitcoin and equity markets similarly, creating pressure on prices. Speculators typically expect that correlation only lasts a few months. Year to date, BTC’s value is up about 22%, while the S&P is down about 2%.
In a recent OKCoin Twitter poll, 64.5% of voters predicted that BTC-SPX correlation would increase, while 35.5% said it would decrease.
Bitcoin rate of difficulty and hashrate at all-time highs
The July 13th adjustment increased Bitcoin mining difficulty 9.89% from 17.35 T to 15.78 T, increasing the hashrate from 112.84 EH/s to 123.85 EH/s. Today, the Bitcoin hashrate sits at 124.9 EH/s.
The difficulty adjustment is an event that occurs every two weeks, changing how much energy must be used in order to confirm a block of transactions to the blockchain. This process manages the rate at which blocks are added to the chain; if blocks are being “generated too fast, the difficulty increases,” explains the Bitcoin whitepaper.
As Coinmetrics noted on Twitter, it’s taken only two months from the third Bitcoin halving for the rate of difficulty to reach an all-time high.
As the hashrate increases and confirming blocks becomes more expensive, miners’ profits decrease. Miners see their percentage of network margins squeezed, which reduces sell side pressure and lessens the ability for one group to move the market.
Despite this indicative squeezing of profitability for miners, it seems that overall sentiment has remained positive. With new miners and better machinery joining the network, it appears that miners are bullish.
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