Connect with us

Bitcoin

Stock Market Sees Largest Surge Since V-Shaped Recovery, Another Leg For Bitcoin?

Published

on



On the heels of positive vaccine news and a winner finally being declared in the US presidential election, major US stock indices like the S&P 500 and the Dow Jones Industrial Average set a new all-time high price record. Due to the ongoing correlation with the stock market, could Bitcoin also see another leg higher, and finally also set a new peak after three years of a bear market?

Blue Wave: S&P 500, Dow Jones Set New All-Time High On Positive Vaccine News

Bitcoin price action all last week was some of the most bullish its been in years, taking the leading cryptocurrency by market cap all the way to just under $16,000. The long-awaited “decoupling” of the cryptocurrency and the stock market also arrived, according to analysts, which explained previous stock market weakness compared to Bitcoin.

RELATED READING | DECOUPLED: ANALYZING BITCOIN DIVERGING AWAY FROM THE STOCK MARKET

But with a winner of the US election finally called by the Associated Press, stock markets instead followed, soaring to new all-time highs.

The S&P 500 soars to new all-time highs following positive vaccine news, blue wave win | Source: SPX on TradingView.com

The S&P 500, set a new record, and the Dow Jones Industrial Average that has thus far only set lower highs since Black Thursday, finally hit a new peak for 2020 before pulling back some.

The move in the stock market is unexpected, as most analysts have concluded a collapse is near. Several signs that the stock market is topping have been completely ignored and markets appear to be completely irrational in the face of economic disaster.

And if stocks are instead bullish with a Biden win, a combination that also wasn’t expected, could this also propel Bitcoin to a new all-time high in 2020?

2020: Could It Be The Year Bitcoin Breaks $20K?

Bitcoin at this point came to less than $4,000 away from setting a new all-time high price record last week. The ongoing rally has sparked discussion of the crypto asset’s decoupling from the stock market, but a surprise rally in stocks could keep the correlation continuing for some time.

While it did indeed look like Bitcoin was decoupling, today’s price action and impulse up in the major US stock indices, like the S&P 500 and the Dow Jones, suggest that they could be following the cryptocurrency market as they have in the past.

bitcoin btcusd stock market

Was this Bitcoin's decoupling, or are stocks starting to follow what has become a leading indicator? | Source: BTCUSD on TradingView.com

It is not clear why this would exist, but perhaps the always-on crypto market makes investor sentiment change more susceptible and therefore occur ahead of the rest of the finance market.

RELATED READING | TOP BITCOIN EXPERT CLAIMS “THE TRAIN HAS LEFT THE STATION” WITH $14K BROKEN

This isn’t the first time Bitcoin has looked to be a leading indicator for the stock market. But the correlation isn’t all negative. The stock market’s recovery has helped keep Bitcoin climbing, and this latest push to all-time highs, could also follow in Bitcoin and the cryptocurrency could finally retest its previous high of $20,000.

Featured image from Deposit Photos, Charts from TradingView.com



Source link

Bitcoin

Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K

Published

on

By


Bitcoin price is still in a rut, trading near $33,000 and trapped in a downtrend that just seems to get worse with the passing of each day. As the price slumps, analysts have consulted with several technical and on-chain metrics to explain the price collapse, but none of these have picked up on the exact reason. 

One area of interest has been the sharp rise in short positions at Bitfinex in the past week. Traders are placing exaggerated importance on these Bitcoin (BTC) margin shorts as if they are predictors of the current market crash. Still, as Cointelegraph previously reported, analysts forget that Bitcoin margin longs are usually much larger.

On June 18, longs outnumbered Bitfinex shorts by at least 22,800 BTC, but 87% of the short positions were closed before June 22. Currently, margin longs are 43,850 BTC higher than the amount shorted.

While those shorts are usually savvy traders, it is unlikely that they knew in advance that Chinese banks would prevent their clients from engaging in activities involving crypto trading or mining.

More importantly, these bearish positions were built while MicroStrategy was buying $500 million in Bitcoin after a successful senior secured note private offer. To make things worse, Michael Saylor’s business intelligence firm announced the intention to raise another $1 billion by selling stocks to buy Bitcoin.

Let’s take a look at how these courageous shorts fared.

Bitfinex margin shorts (blue) vs. Bitcoin price in USD (orange). Source: TradingView

On June 6, shorts increased from 1,380 to 6,700 at an average price of $36,150. Three days later, another 12,180 shorts were added when Bitcoin was trading at $37,050. Lastly, between June 14 and 15, shorts increased 6,000 to a 25,000 peak while Bitcoin averaged $40,100.

By looking at the Bitcoin prices when those short position increases took place, it is reasonable to assume that the 23,500 contract increase (green circles) had an average price of $37,625.

Related: Traders search for bearish signals after Bitcoin futures enter backwardation

Traders closed positions before BTC crashed bel$32,000

These short positions were steadily closed over the past three days when Bitcoin was already trading below $37,000. However, 17,000 short contracts had already been closed by the time the price plunged below $33,500. Therefore, it is implausible that the average price was below $34,500.

No one would complain about gaining 8%, shorting the market to generate a $73 million profit. However, it is essential to note that on June 16, when Bitcoin reached $40,400, these shorts were underwater by $65 million.

This analysis shows how even highly professional traders can go deep underwater. There’s no way to know if this trade would have been profitable had the crackdown on China not aggravated Bitcoin price or if MicroStrategy managed to raise the $1 billion before the price drop.

If anyone still believes in market manipulation, at least there’s comfort in knowing that pro traders can face drastic losses as well. However, unlike us mortals, whales have deep pockets and patience to withhold even the most rigorous thunderstorms.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.