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Bloomberg Analyst: Bitcoin’s Link With Nasdaq Being Broken Favors Continuation

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Bitcoin has given a powerful buy signal that demanded the financial world begin paying closer attention to cryptocurrencies. The recent momentum has also caused the top crypto asset to “decouple” from the stock market. 

Thus far, it has been primarily crypto analysts shouting about the coming decoupling, but now even Bloomberg Intelligence senior commodity strategist Mike McGlone says that the divergence away from the Nasdaq 100 is the “underpinnings for further appreciation.”

Here are the fundamental and technical reasons the top market analyst believes that Bitcoin is ready to beat tech stocks in performance for an extended period, now that the “link” since 2017 has been broken.

Bitcoin Diverges Away From Tech Stocks, Bloomberg Analyst Expects Extended Overperformence in BTC

Tech stock valuations have reached astronomical figures, even while the economy falls into a depression. Apple, Amazon, Microsoft, Google, Tesla, and several other heavy hitters, are undeniably overvalued, and the stock market could see an extended correction or phase of minimal returns.

Meanwhile, a top Bloomberg analyst expects Bitcoin to do the complete opposite, and move into a period of extended overperformance against tech stocks.

Bloomberg’s senior commodity strategist Mike McGlone regularly shares his thoughts about Bitcoin over social media and on the big business and finance brand.

McGlone's chart focuses on the Nasdaq's performance against BTC | Source: Bloomberg Intelligence

McGlone has shared a new chart, stacking Satoshi’s creation against the Nasdaq 100 index of tech stocks – one of the best performing indices in recent years. The chart demonstrates a clear break of the “extended link” keeping Bitcoin shackled to the stock index since 2017, the analyst said.

RELATED READING | BLOOMBERG SENIOR STRATEGIST: BITCOIN MAY TURN “PARABOLIC” IN 2021

The correlation “between the price of the benchmark crypto and technology-led equity gauge appears to be ending, with fundamental and technical factors favoring Bitcoin,” he added.

Fundamental And Technical Factors Driving The Cryptocurrency’s Outperformance

The visual representation of the Nasdaq’s performance against Bitcoin is just one of the ways McGlone says that the cryptocurrency is poised technically for a boost. The first-ever crypto asset also recently set a higher high and a higher low, confirming an uptrend.

Each time Bitcoin was able to break above the correlation with the Nasdaq, it coincidentally fell back down to retest the indicator line, then surged another sizable percent.

bitcoin bloomberg nasdaq

Will BTC come back to retest the Nasdaq indicator line as support around $11,500? | Source: BTCUSD on TradingView.com

If Bitcoin price corrects back down to support at $11,500, it could be the final buy signal before as McGlone says, the cryptocurrency goes parabolic once again.

RELATED READING | BITCOIN OVERTAKES PAYPAL MARKET CAP, SETS SIGHTS ON VISA, MASTERCARD, AND BIG BANKS NEXT

Fundamentally, the amount of BTC on exchanges is ever decreasing, while whale-sized wallets grow each day. Nearly every network health metric in Bitcoin is at or near all-time highs, giving the crypto asset the foundation fundamentally to support the bullish technicals, and send it off into a new bull market.

FEATURED IMAGE FROM DEPOSIT PHOTOS, CHARTS FROM TRADINGVIEW.COM





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Bitcoin

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

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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.