Bitcoin (BTC) derivatives have flipped, suggesting that the bullish momentum seen over the past month is now gone, while Bitcoin's correlation to traditional markets has noticeably jumped.
Bitcoin price resilient above $41,800
BTC price experienced moderate volatility on the night of Jan. 14 as its price plunged to $41,690, paring 3% in the early hours of Jan. 15.
Related: BTC speculators dump $5B - 5 things to know in Bitcoin this week
More interestingly, this was the sixth time that the $41,800 support was tested in less than a month. Traders now question if the latest movement is a sign of strength and what the drivers for a potential rally above $44,000 could be.
month. Traders now question if the latest movement is a sign of strength and what the drivers for a potential rally above $44,000 could be.
Bitcoin/USD price index, 12-hour. Source: TradingView
Some analysts attribute the BTC price 9.1% correction on Jan. 12 to Bitcoin miners' outflows, as CryptoQuant reported nearly $1 billion worth of BTC sent to exchanges - a six- year high.
Investors fear that Bitcoin's hash rate, which has increased by 44% in the past six months, will force miners to sell coins at a much higher pace, including their holding positions.
Digital Asset manager CoinShares predicts that the average Bitcoin mining cost after the April 2024 halving will surge to $37,800.
CoinShares' report encompasses 19% of the current Bitcoin mining hashpower..
November and above 75% relative to the S&P 500 futures for the past three weeks.
Those numbers drastically vary over time, but the latest data signal that the macroeconomic drivers affected traditional assets and Bitcoin in a similar way.
Related: Bitcoin and correlations -
Examining the relationship between BTC, gold and the Nasdaq
For instance, Germany, Europe's largest economy, announced on Jan. 15 an adjusted 0.1% gross domestic product contraction in 2023 versus the prior year. More concerningly, Germany's economy ministry mentioned on Jan. 15 that "current early indicators do not signal a quick economic recovery," according to Reuters.
In the U.S., inflation remains the biggest source of concern after the Consumer Price Index grew 3.4% in November. According to Rubeela Farooqi, chief economist at High Frequency
would require an annualized premium below 5%, it becomes evident that Bitcoin investors are no longer expecting its price to pump in the short term.
One might never find out what exactly triggered the correction to $41,690, and it might as well be related to BlackRock's CEO Larry Fink calling the spot ETF a "mere stepping stone to tokenization" of real-world assets, which is definitely not beneficial for BTC price in the short term.
Fink also recently commented on Bitcoin that:
"I don't believe it's ever going to be a currency. I believe it's an asset class."
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author's alone and do not necessarily reflect represent the views and opinions.
