Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
Analyzing BTC’s emerging market dynamics
Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!
This week, we switch our focus to Bitcoin, where token speculation has waned out and macro factors become relevant again — albeit in a different way than in previous years.
We evaluate arguments for Bitcoin undergoing a change in the dominant trading environment, stepping away from the 2021–2022 stock-led regime and into the land of digital precious metals.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether.
- Bitcoin fees dropped by 60% as Ordinal inscriptions declined along with the market cap of BRC-20s
- Activity on Ethereum also decreased sharply, with the meme token frenzy fading off
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- After more than a billion in CEX outflows last week, Bitcoin and Ether both recorded about $200M leaving exchanges
Bitcoin’s Changing Regime
As meme token speculation eases, markets have settled in terms of price action, reaching historically relevant levels of low volatility. Within Bitcoin markets, attention shifted from Ordinals to the U.S. government’s debt ceiling negotiations.
Reuters reported growing hopes of a debt ceiling deal being reached and stocks rallying as this uncertainty gets sorted. The news sent the Nasdaq 100 index to a yearly high, while crypto remains below its recently-set highs. This divergence may be signalling a change in market regime after closely following stocks throughout 2022.
Via IntoTheBlock’s Capital Market Insights
End of an era? Signs may be emerging pointing to crypto and stocks no longer being correlated, at least for the time being
- Fed tightening had weighed down on stocks and crypto alike throughout 2022
- As the end of the tightening cycle approaches, the market has shifted gears and has begun treating crypto and stocks more separately as seen with the recent divergence
Via IntoTheBlock’s Capital Market Insights
Digital Gold? Bitcoin and precious metals have been increasingly correlated
- Crypto has been following gold and silver more closely as the macro focus shifts from interest rates to bank failures and risk of default
- The higher correlation regime with precious metals likely began following the Silicon Valley Bank failure and its corresponding government response, and appears to be prevailing as the debt ceiling deadline approaches
- The USD rebound may also be a factor in the recent decline in both crypto and precious metals, with Bitcoin and the DXY index having a strong negative correlation of -0.7 at the moment
So is the recent movement in tandem with precious metals just a fluke, or are there other reasons to support the thesis of Bitcoin as digital gold?
Via IntoTheBlock’s Bitcoin Ownership Indicators
Store of Value Schelling Point — Long-term Bitcoin holders’ actions help propel its potential as digital gold
- Like with gold, arguably much of Bitcoin’s value derives from the shared belief their holders have that the asset will sustain its value over time
- This behavior is evidenced by the total amount of Bitcoin held by “hodlers” approaching its all-time high set earlier in March
- In light of the debt ceiling uncertainty, market participants may have anticipated increasing value of alternatives outside the traditional finance system (such as gold and Bitcoin), which may be the reason why these have dropped in value as odds of a debt deal being reached increase
Overall, this highlights the complex, multi-faceted role Bitcoin and crypto broadly are facing within the macro environment. Though its unclear how long the trend will last, it is becoming increasingly clear that market participants are treating Bitcoin more as a digital metal and less so as a high-beta stock.
Bitcoin’s Changing Regime was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.