Bitcoin Moves #10: Fundamentals Remain Strong as Price Dips Below $10k

Bitcoin Moves OKCoin cryptocurrency exchange Bitcoin report BTC price buy Bitcoin

Bitcoin Moves #10: Fundamentals Remain Strong as Price Dips Below $10k

In the last week bitcoin has fallen over 17% from its high of $12,055 a week ago, to a low today of $9,920. In today’s Bitcoin Moves report we look at what has driven this decrease in BTC price, and what it means for traders. 

What do you think; are you bullish or bearish on bitcoin from this point?Tell us on Twitter.

Catch up on last week’s report where we provided insight into the resistance that BTC experienced at $12k. 

TL;DR: 

  1. As the S&P 500 has declined, so too has bitcoin, increasing the correlation between the two assets by 50%.
  2. Bitcoin has fluctuated in price over the past week, with volatility increasing over 26%. The volatility of bitcoin has risen 110% over the past month. 
  3. Bitcoin’s fundamentals remain strong, particularly in contrast to the monetary policy of the Federal Reserve and the impact that is having on fiat currency (USD).
  4. IntoTheBlock’s BTC short term signals point to a bearish market, analyzing live market and network data. 

Here’s your market snapshot: 

All prices are in USD and time zones are PT.

Bitcoin price movements

  • Current Bitcoin price: USD $10,034 down ~12% from last week (USD $11,394)
  • 24hr high: USD $10,432
  • 24hr low: USD $9,920
  • 24hr change: -1.15%
  • 24hr BTC volume sits around USD $24.7 billion, down 5% from last week (USD $26 billion)
  • Total circulating BTC: 18.482 million
  • Bitcoin dominance sits ~56.53%
  • 30 day high / low: USD $12,359 / $11,094
  • 90 day high / low: USD $12,359 / $8,975
  • Bitcoin Volatility Index (BVI), 30day: 1.62%, up 26% over last week (1.28%)
  • Hashrate: 127.80 EH/s, up 2.1% over last week (125.16EH/s)
  • Network value to transaction ratio (NVT): 79.28
  • US dollar index (DXY): 93.49 up 0.7% from last week (92.82)
  • SPX-BTC 90d correlation: 0.311, up 0.97% over last week (0.308)

BTC-USD 7day, via OKCoin 

BTC-USD, 7day, 1hour line via OKCoin

S&P declines and correlation to equity markets increases 50% 

It’s likely that as investors saw the “S&P 500 record its first weekly loss in six weeks,” as reported by Forbes’ Billy Bambrough, they became panicked and looked to sell off other positions. Equity markets have fallen about 7% in just six days, and BTC has followed, dropping ~15% over the same period. 

SPX-USD, 10day, 5min line via Marketwatch

The correlation between SPX and BTC has increased 50% over the last month, as seen in the chart below from Coin Metrics.  

BTC-SPX correlation, 90day average, 30day chart via Coin Metrics

Stay focused on bitcoin’s fundamentals 

Forbes writer Joseph Young says a plunge like we saw in March isn’t likely to happen again, noting that “the market is in a different position” than it was then. “Bitcoin’s market structure remains in a bullish state, especially considering that BTC traded above $10,000 for the longest period since 2017.” Young explains that “there are five fundamental factors that buoy the longer term bull trend of Bitcoin, which differentiates it from March. The factors are the presence of whale orders, BTC’s resilience above $10,000, and an expected reaction to heavy resistance, March’s black swan event, and the market dynamic at the time of the crash.” Read the rest of the Forbes article

Bitcoin volatility, 1 month, via 99bitcoins.com

In his Friday newsletter, Anthony Pompliano discussed the importance of Bitcoin’s underlying fundamentals and how they tell a compelling story, underscoring how the network and cryptocurrency continues to strengthen. In this piece, Pompliano specifically points to many of the metrics that we review here on a weekly basis, including market cap, hashrate, volatility, and the S2F model from PlanB that we covered last week. Pompliano notes that because of these core fundamentals, bitcoin’s day-to-day price fluctuations are not concerning to him — he’s a long term hodler and these metrics continue to tell a very bullish story.

For traders, the increase in volatility provides opportunities, and recently we have seen the Bitcoin Volatility Index increase 111%, from 0.767 on August 7th to 1.62 a month later, as seen in the chart above. 

Looking at bitcoin from a short term, day-by-day perspective, IntoTheBlock’s signals are currently bearish:  

The benefits of bitcoin’s programmatic monetary supply compared to fiat currency monetary policy

In today’s investor newsletter from Anthony Pompliano, the podcast host and writer explains the contrary processes behind fiat and bitcoin monetary policy. 

Pompliano says that unlike how the central banking system treats monetary policy decisions, Bitcoin has a monetary policy that never changes, bases decisions on consensus, and is built on a system to prevent interventionism. In contrast, action by the Federal Reserve is based on a set schedule of meetings made by a centralized group of government appointed officials, and “interventionism is seen as a necessity during times of crisis.” 

The clear advantage here lies in the fact that the “creation of new bitcoin is written in software code and anyone can audit the code at any time,” says Pompliano. The value of bitcoin can’t be eroded by creating more of them. Back in April we wrote a detailed piece about how bitcoin is the antidote to unlimited money, explaining that its limited supply curve and scarcity is what continues to drive interest and investment in bitcoin — it feels particularly relevant today.

In the news

Why Investors Aren’t Worried About This Price Pullback

Nathaniel Whittemore notes that “critiques of correlation between bitcoin and equities miss the fact that bitcoin adoption within traditional markets has been driven by a fiat collapse concern.” Listen to NLW’s podcast on Coindesk.

Bitcoin’s Breach of $10,000 Mark May Portend Deeper Losses 

“Bitcoin is falling in tandem with US stocks, and technical indicators suggest the digital token could decline further if it fails to reverse recent downside momentum.” Read the Bloomberg article from Vildana Hajric

Recommended reads

What is yETH and how will it benefit ETH?

Earn.finance is releasing “yETH,” here’s what it could mean for the price of Ethereum. Read the yETH blog post.

Tron (TRX) Surges Amid Pivot to DeFi? 

Last week Tron surged 60%, countering Ethereum’s high fees. Read the TRX blog post.

Institutional investors are still showing support for bitcoin as a hedge to USD and hodlers point to strong fundamentals. Will these price swings provide short term volatility over the next days and weeks, or was the recent high over $12k the top for 2020? Looks like the popular opinion is that we’re headed back to $12k. 

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