Bitcoin is No Longer Correlated with Gold

Jue, 03/25/2021 - 13:29 -- mpalacios

Price Movements

In search of regulatory clarity. The recently proposed STABLE Act, a series of measures requiring issuers of stablecoins and (possibly) the blockchains they operate on to be licensed, is perhaps the most direct attempt yet by U.S. lawmakers to regulate the cryptocurrency industry. The proposed legislation immediately sparked an outcry far and wide, even earning an entire section in the New York Time’s Dealbook, which included statements comparing the regulation to that proposed during the early days of the Internet. We all knew that regulation was coming, but in what form, who was to say. In other news, Bitcoin and Ethereum ended the week down only slightly after recovering from a sharp mid-week correction.

Ethereum for institutional investors? Historically, Bitcoin has been the on-ramp to cryptocurrency markets for traditional investors, but Ethereum is increasingly seen as a viable alternative asset. “There’s a growing conviction around Ethereum as an asset class”, according to the managing director at Grayscale Investments, whose Ethereum Trust for institutional investors has grown considerably over the past year. Ethereum’s YTD returns crush nearly every other crypto-asset, including Bitcoin’s, buoyed in part by several fundamental news events such as the launch of ETH 2.0 and the growth of decentralized finance.

XRP traders take profit. XRP’s implausible rise over the past month has left many scratching their heads, after years spent trading between an increasingly narrow range with no strong price movements in either direction. XRP’s rally coincides with Bitcoin’s bull run, which pushed many altcoins to multi-year highs. However, the rally is undoubtedly linked to a recent airdrop distributed to XRP investors, which saw many new traders scrambling to purchase the altcoin in advance of the event (as can be observed by the parabolic increase in trading volume). Immediately following the airdrop on December 12th, XRP crashed 8%, implying that investors are choosing to take profit following the frenzy.

Trading Volume

Bitso exchange raises $62 million. Very little data-driven coverage of the cryptocurrency industry focuses on Latin American markets, which is why this week we take a look at Bitso, one of the few Latin American crypto exchanges. Last week, it was announced that Bitso had raised a massive Series B funding round, with Coinbase as one of the backers. Over the years, Bitso has seen its users grow to over 1 million, with increasing real-world use cases tied to Mexican Peso-U.S. Dollar remittances in addition to concerns over currency deflation. We can identify a strong trend in trading volume since 2019, with nearly parabolic growth until May of this year, likely one factor in the successful funding round.

Highest trading volumes during New York and U.K. hours. In a new series of charts, we will be taking a look at trends in trading volume aggregated over time. This week’s charts are constructed using 6 months of hourly volume data for BTC-USD trading pairs, averaged per hour of day. We found that the most trading occurs during the overlap between U.K. and New York trading hours, between 13:00 and 16:00 UTC (8am and 11am EST).

When looking at the four highest volume exchanges for BTC-USD, we can better observe the trends in volume, which appear strongest on Coinbase. Volume nearly doubles between the early hours of the morning and 9am EST, indicating that many BTC-USD traders are based in the Eastern time zone and trade at the start of the day.

Order Book Liquidity

Inverse bid-ask depth correlation during price volatility. As the price of Bitcoin falls, the quantity of asks decreases while the quantity of bids rises — and vice versa. This trend holds during times of volatility, such as a rapid price drop or rally. When prices are stable, both ask depth and bid depth increase steadily.

Spreads stabilize after a volatile November. Although there have been plenty of price swings this month, the bid-ask spread on most exchanges has stabilized since the start of December. The stabilization comes as Bitcoin’s momentum slows down and the asset trades steadily between a range of $18k and $19k.

Volatility and Correlations

Bitcoin-Gold correlation turns negative. For the first time since early July, Bitcoin’s correlation with Gold has entered into negative territory, indicating that daily returns for the two assets have had almost no correlation over the past 30 days. This event comes amidst increasing buzz around Bitcoin’s “Digital Gold” narrative, which has attracted extensive media coverage and new institutional investors over the past month. Bitcoin’s correlation with the S&P 500 and Nasdaq also took a nosedive, as traditional markets and cryptocurrency markets increasingly diverge in price behavior.

Crypto volatility continues to climb. Volatility has remained flat over the past month for traditional financial assets, while crypto-asset volatility continues to rise. Despite a few blockbuster IPOs, equities markets have faltered recently amidst stalling stimulus talks, worsening virus conditions, and Brexit uncertainty.

Any redistribution of charts appearing in this Factsheet must cite Kaiko as the sole provider and creator. This Factsheet was written by Clara Medalie, developed by Anastasia Melachrinos with help from the Kaiko team. This is not financial advice.

Tema de investigación: 
Arquitectura financiera