Bitcoin Price Update: Strong Institutional Interest Sets Stage for $50,000 Amidst Declining Correlation with Equities and Surging Open Interest
Crypto News – The week commenced on a positive note as Bitcoin surged past the $42,000 mark on Monday, December 4. Currently, Bitcoin is in a phase of partial consolidation, trading at $41,762 with a market capitalization of $817 billion.
Decoupling from Traditional Equities
In 2023, Bitcoin has witnessed an astonishing 150% surge, breaking away from its historical correlation with traditional equities. This year, Bitcoin’s correlation with equities has been steadily declining.
Monday’s 5.8% price surge to breach the $42,000 milestone stood in stark contrast to traditional market indicators such as global stocks and bonds, which experienced losses at the week’s outset. Analysts, including Sean Farrell, Head of Digital-Asset Strategy at Fundstrat Global Advisors LLC, view this divergence as a significant indicator of Bitcoin’s diminishing correlation with conventional macro assets.
Throughout 2023, Bitcoin’s correlations with stocks and gold have notably diminished. The 90-day correlation coefficient between Bitcoin and MSCI Inc.’s global shares index plummeted from 0.60 at the year’s outset to 0.18. Similarly, Bitcoin’s correlation with spot gold has approached zero, down from 0.36. This shift underscores the diminishing alignment in price movements, emphasizing Bitcoin’s evolving status as a distinct and less tethered asset within the financial landscape.
Surge in Bitcoin Open Interest
Bitcoin’s open interest in perpetual futures on the Deribit derivatives exchange has reached a yearly high, soaring to $740 million. This level hasn’t been observed since November 2021, coinciding with Bitcoin’s previous all-time high of over $68,000.
The increased open interest serves as a clear indication of a renewed influx of funds into the market, reflecting heightened participation and potential liquidity. Justin d’Anethan, Head of Business Development for APAC at Keyrock, points to the significant premium on CME Bitcoin futures contracts as an additional sign of increased institutional engagement.
D’Anethan noted, “The healthy futures premium on CME contracts suggests the interest of large sophisticated players in gaining exposure to BTC.” This observation aligns with data from The Block’s Data Dashboard, revealing an all-time high in CME Bitcoin long open interest held by asset managers, totaling nearly $2.2 billion.
D’Anethan further emphasized that the heightened participation from sophisticated players is likely driven by the imminent decision on spot Bitcoin ETFs, expected in mid to late January. This development underscores the evolving dynamics and growing interest of institutional entities in the Bitcoin market.
Technical Outlook
From a technical perspective, Bitcoin’s current Relative Strength Index (RSI) stands at 76.5, indicating overbought conditions. A drop in RSI below 65 could potentially fuel further momentum, propelling Bitcoin’s price toward the coveted $50,000 mark.
While the upcoming Bitcoin ETF launch has been a topic of widespread discussion and anticipation, another significant catalyst looms on the horizon: the Bitcoin halving event scheduled for April 2024. Historical data suggests that Bitcoin halvings have historically triggered substantial price rallies. Analysts have already begun issuing bullish price predictions, some as optimistic as foreseeing Bitcoin reaching $500,000 during the next bull run.
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