- Bitcoin is about to stop its pattern of correlation with traditional assets after a three year crypto winter, according to some analysts.
- MicroStrategy’s USD 425 million Bitcoin purchase isn’t a hedge. It’s a bet on the Bitcoin standard.
Bitcoin and crypto finished the week on a high, after initially struggling to make any headway since the last weekend but finally finishing on Friday about 5% up over the week, despite earlier worries of increased volatility in the markets with a record-setting day for Bitcoin options expiry.
And now, famed crypto statistician Willy Woo has boldly declared that Bitcoin as its own class of asset may very well be on the verge of decoupling from traditional ones. This, he says, is because of the breakdown of a key gold relationship out of a long-term downtrend perceived over the last three years.
Bitcoin will decouple from traditional markets soon, but driven by its internal adoption s-curve (think startup style growth) rather than changes in perceptions as a hedging instrument by traditional investors.
Fundamentals of user adoption have already broken all time highs.
— Willy Woo (@woonomic) September 24, 2020
He also believes that other strong fundamentals back this up, for example, the fact that user adoption in Bitcoin itself has also broken all time highs. And in this sense, Woo believes that Bitcoin has proven itself, much like a successful startup company would, in attracting new interest and then forging its own future path later on. He uses the classic S-curve pattern that shows how startups mainly grow, and that this would truly appeal to investors looking to further hedge their portfolios against other assets. He wrote:
“Bitcoin will decouple from traditional markets soon, but driven by its internal adoption s-curve (think startup style growth) rather than changes in perceptions as a hedging instrument by traditional investors.”
He now claims that Bitcoin’s correlation with traditional assets on a macro level will very soon be upon us, and, there are several other key Bitcoin fundamentals that are also solidifying to support this theory. For example, if we look at network hash rate and difficulty, they are both currently at record levels, further proving just how competitive Bitcoin has been and how miners continue to see long-term appreciation gains.
And so far, Woo has been right on the nail with how Bitcoin is breaking away from traditional assets. If we take a look at the US dollar currency index (DXY), we can find further evidence on charts that this decoupling could be underway as we speak.
This is happening now in Bitcoin’s price ratio versus gold, which has always been in a downtrend since the all-time highs achieved December 2017, almost three years ago. And two months ago in July, this broke to the upside when the pair reclaimed USD 12,000. Further stress tests of this trendline so far look good and seem to confirm this new support, resulting to an upside bounce.
— Travis Kling (@Travis_Kling) September 25, 2020
Crypto hedge fund Ikigai’s Travis Kling has also been another voice to add to this observation, and he believes that the weekly chart performance over the past three years is definitely one to watch out for.
Meanwhile, MicroStrategy’s wave-making moves in the industry continues to spread chatter all over the Internet, with the Bitcoin adopter concluding that Bitcoin is the most non-toxic currency and that it genuinely wanted to adopt a “Bitcoin standard”. CEO Michael Saylor said this during a spot on RT host Max Keiser’s Keiser Report TV show on Thursday.
MicroStrategy made a lot of heads turn when it decided this year to buy USD 425 million worth of Bitcoin but the company insists that the purchase had nothing to do with it hedging, and instead is a display of faith that they’re going all in on Bitcoin. It claims that there is a currency war going on right now and they were simply picking the least toxic one:
“What we have is a war on currency, and not a war to make the US currency weaker than the euro; the war on currency is anybody holding currency is getting attacked. And so now we’re starting to realize that currency is being made toxic by the political… financial policies of the central banks, you kind of have to run away from that currency to something that’s not toxic, and I think that Bitcoin is that non-toxic currency.”
The MicroStrategy CEO also now says that swapping cash for Bitcoin is only logical since assets that were strong in scarcity were actually inflating by about 25% this year, and will continue to do so about 10% every year after. Betting on cash now is likened to betting on a melting ice cube.
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