Why Isn’t Bitcoin Outperforming Most Risk Assets? A Market Conundrum
August 02 2023 - 7:00PM
NEWSBTC
Mike McGlone, Senior Commodity Strategist at Bloomberg
Intelligence, has recently suggested that Bitcoin’s (BTC)
underperformance compared to the stock market may be a warning sign
for investors. BTC’s Failure To Outshine In A Bull Market
McGlone notes that Bitcoin has declined compared to the Nasdaq 100
stock index since its 2021 peak and April bounce. This waning
performance may presage rising headwinds not only for Bitcoin but
also for the broader crypto market. McGlone stated: If Bitcoin
truly is the “fastest-horse-in-the-race,” as some consider it to
be, then it should logically be outperforming in an everything bull
market. However, that is not the case. Notably, McGlone
points to the most aggressive liquidity pull from central banks in
history, which may be a significant factor in Bitcoin’s
underperformance. Related Reading: Buying Pressure Incoming?
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The Federal Reserve (Fed) is still sighting in 3Q, despite the
producer price index finished-goods gauge at minus 3.1% and
dropping from 2022’s 18.3% peak at its fastest pace since 1948,
which may be part of what underperforming Bitcoin is “sniffing
out,” according to McGlone. On a one-year basis to August
1st, Bitcoin is up just over 20%, similar to the Nasdaq, yet the
crypto’s volatility is about two times greater. McGlone believes
Bitcoin’s underperformance may be a warning sign for the broader
market. The fact that Bitcoin is not outperforming as it should be
in an everything-bull market could indicate that more significant
market issues are at play, particularly in the face of aggressive
liquidity pulls from central banks. Bitcoin And Ethereum Volatility
At Historic Lows In a statement shared with NewsBTC Luuk Strijers,
the Chief Commercial Officer at Deribit, a prominent cryptocurrency
derivatives exchange, has recently stated that the Deribit
Volatility Index (DVOL) for both Bitcoin and Ethereum is currently
trading at an all-time low. This is a significant
development, especially since the DVOL for ETH is trading below the
DVOL for BTC, which is a rare occurrence and may have been caused
by the activity of a single large trader, commonly known as a
whale. Despite the current low levels of volatility, Luuk Strijers
highlights that the market is anticipating a considerable upswing
in volatility shortly. This expectation is driven by several
factors, including the upcoming ruling on the Blackrock spot
Exchange-Traded Fund (ETF) and the approaching Bitcoin Halving.
Strijers notes that Deribit has been observing signs of these
expectations in the market, such as the significant steepness of
the term structure, with June ’24 trades at approximately 50, and
the enduring call skew. These indicators suggest that the
market is anticipating increased volatility and potential price
movements shortly, despite the current low levels of volatility.
The Blackrock spot ETF ruling is anticipated to impact the
cryptocurrency market significantly. If approved, the ETF will
allow investors to gain exposure to Bitcoin without directly
holding the cryptocurrency, potentially increasing demand and
driving up prices. Related Reading: Shiba Inu Price
Prediction: Is Shibarium The Key To A Trend Reversal? On the other
hand, if the ruling is not approved, it may lead to a temporary
drop in prices and increased volatility. The approaching Bitcoin
Halvening, which is expected to occur in 2024, is another factor
contributing to the anticipation of increased volatility, according
to Strijers. The Halvening is a significant event in the
Bitcoin network that occurs roughly every four years, where the
block reward for Bitcoin miners is cut in half. This tends to
reduce the supply of Bitcoin on the market, potentially driving up
prices and increasing volatility. Despite the current low levels of
volatility, Strijers suggests that investors and traders should
remain vigilant and prepare for potential price movements and
increased volatility in the cryptocurrency market. At the time of
writing, BTC is trading at $29,100, representing a slight increase
of 0.8% in the past 24 hours. Featured image from iStock, chart
from TradingView.com
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