Seems to me that $BTC correlation with global markets is being used fairly indiscriminately, and with some confirmation bias in most takes I’ve seen recently - i.e. cherry picking the starting point of the analysis to fit narrative.
Let’s clear the air a bit.
Let’s clear the air a bit.
1/ While Covid-19 was a given since the beginning of the year, the impact in global markets hit around 17/2 when China changed the methodology of how active cases were recorded.
On that day 20k new cases were announced, fear took over, and risk-asset correls went to 1.
On that day 20k new cases were announced, fear took over, and risk-asset correls went to 1.
2/ 17-Feb is the point where we entered a post-risk-parity domain space. Among other things, this means that cross-asset strategies that worked before 17-Feb don’t any more, and likely won’t for the near future.
It also means that others will.
It also means that others will.
3/ Here’s a thought - in the post 17-Feb paradigm, what if with correlations among risk-asset class indices being (still) very high, the spreads between them are opportunities to be arbitraged away?
4/ From where I stand, the $SPX still looks like the centre of gravity for risk assets - and that includes $BTC. Calling for a decoupling, and without accounting for mean reversion is naive at best.
5/ So far Bitcoin’s outperformance in the upturn can just as easily be attributed to more attractive relative value - $BTC more oversold compared to $SPX, better r/r to long $BTC - as it can to it growing into the digital gold narrative.
6/ Which in itself, is a HUGE achievement. It means that cryptoassets (with #Bitcoin leading) are firmly considered their own in the galaxy of asset classes. I do think though that calling for decoupling ALREADY, is setting the bar high enough.
7/ What's the narrative that we spin up, if this doesn't play out as desired? Do we call it “oh well, I guess still a risk-asset”? Another flavour perhaps? Or do we “hang our hats”?
How many narrative iterations are one too many?
How many narrative iterations are one too many?
6/ From where I stand, to consider Bitcoin decoupled and growing into the digital gold narrative, we need to see:
- $BTC > $SPX in relative returns for the period
- $BTC flat or up while the $SPX is flat or down
- Benchmarked off of Feb-20
- $BTC > $SPX in relative returns for the period
- $BTC flat or up while the $SPX is flat or down
- Benchmarked off of Feb-20
7/ In the near term, if the demand for USD stays high, Bitcoin should - at the very least - benefit from being an intermediary MoE to acquire USD. Leaky, but I'll take it.
But if there is another risk-off move in the coming weeks, I doubt that it will escape the gravity.
But if there is another risk-off move in the coming weeks, I doubt that it will escape the gravity.
