- Bitcoin showed less correlation with stocks and dollar indices.
- The conviction of long-term holders kept BTC stable.
In recent months, Bitcoin [BTC] has moved within narrow trading ranges, with only substantial crypto-specific developments culminating in breakouts. Since early September, the king coin has fluctuated between highs of $25,000 and lows of $27,000, data from CoinMarketCap showed.
How much are 1,10,100 BTCs worth today?
Unlike in the past, the outcome of major macroeconomic catalysts such as the Federal Reserve’s interest rate decision does not appear to have a significant impact on BTC.
Bitcoin decouples
The US central bank has left interest rates unchanged over the past period FOMC meeting, but signaled another rate hike towards the end of the year. While this development roiled stock indices, the largest crypto asset fought back with tenacity.
This is reported by a research agency in the chain In the block, the indicators of the American financial markets Nasdaq 100 and S&P 500 fell by 3.3% and 2.7% respectively last week.
But despite the turbulence in traditional finance, Bitcoin continued to hold on to the $26,500 level, posting a marginal weekly gain of 0.02% at the time of writing. Furthermore, King Coin’s monthly performance clearly outperformed that of TradFi assets.
Source: IntoTheBlock
Therefore, the question arises: what keeps Bitcoin intact in a deteriorating macroeconomic environment?
According to IntoTheBlock, Bitcoin’s correlation with the US Dollar Index (DXY) recently reached zero. This played a role in protecting against the ongoing rally in the index, which measures the USD’s strength against a basket of six foreign currencies.
Source: IntoTheBlock
Rate hikes by the Fed put significant upward pressure on DXY as the policy results in increased demand for dollars from foreign investors. This typically leads to a capital flight to safe havens such as the USD from riskier assets such as stocks and crypto.
However, the weakening correlation meant that issues relevant to the movement of the US dollar would have little significance for BTC. These events underscored that Bitcoin was becoming increasingly disconnected from TradFi entities and more sensitive to events confined to the crypto space.
Crypto-related triggers move BTC
Most of the significant rallies in recent times have come in response to news surrounding Bitcoin spot exchange-traded fund (ETF) filings. This included Grayscale’s major victory against the US Securities and Exchange Commission (SEC) and delays in decision-making on more than half a dozen cases.
As a result, Bitcoin holders resisted the temptations and waited for the results surrounding these ETF applications to unload their bags.
These factors also keep BTC stable
Another major development that reduced BTC’s selling pressure was the decision of defunct crypto exchange Mt. Gox extend the refund deadline was until October 2024. The Bitcoin exchange went bankrupt after a massive theft of nearly 850,000 BTCs came to light.
The market was on the brink given the size of the refunds. However, the delay managed to calm feelings.
Bitcoin’s steadfastness can also be attributed to its growing dominance in the crypto landscape. In recent weeks, the royal coin’s market share rose to 50%, the second time such a feat has been recorded in 2023.
The gap between Bitcoin and the second largest cryptocurrency, Ethereum [ETH], broadened. According to IntoTheBlock, the ratio of Bitcoin’s market cap to Ether’s reached an annual peak last week.
Typically, large-cap cryptos are likely to be less volatile than other assets with lower market caps.
Source: IntoTheBlock
Long term holders continue to accumulate
Last but not least, the remarkable conviction of Bitcoin’s long-term holders (LTH) remains a major reason behind Bitcoin’s stable levels. These seasoned investors have used the bear market’s suppressed prices to add to their holdings.
According to Glassnode, BTC’s dormant supply has soared to new highs in 2023, with most major age categories showing strong HODLing behavior.
Source: Glassnode
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In fact, the total supply controlled by these diamond hands was 75% of the total BTCs in circulation at the time of writing.
Source: Glassnode
It seemed that the resilience of the LTH could help BTC survive these test periods of the bear market. But make no mistake, this cohort would not shy away from taking profits during a bull market as the halving takes place next year and the adoption of spot ETFs is anticipated.
