Bitcoin (BTC) price analysis: outperforming stocks but retail hasn’t noticed yet

btc

Crypto has maintained its relative calm while the stock markets are being pummelled.

This morning top alts are off a little but bitcoin is only 0.56% lower at $6,475, according to coinmarketcap.

The low volatility of bitcoin, and its outperformance of the rest of the crypto market, are trends that look set to continue.

The volatility situation is striking, and seen in the Bloomberg graphic below. It shows, among other things, that in October there has only been one day in which the price has moved + or -5%.

 

btc volatility

BTC volatility has dropped significantly. That’s a bullish sign. Source: Bloomberg

‘Inclined to be bullish’

Bloomberg spoke to Charlie Morris, head of multi asset at Atlantic House Fund Management, on what it all means. Like us, he thinks it is a bullish signal:

“It simply means the market is calm and in balance. That implies that speculative interest is low. Given this bear market is now 10 months old and is getting tired, I’d be inclined to be bullish for the next major move.”

Technical analysis

bitcoin price chart

BTC 1-hour price chart 25 October 2018, 10:50 UTC+1

Bitcoin’s tight rangebound trading continues.

In the past couple of days we have seen a steady fractal pattern of troughs and peaks in a narrow $60 channel.

With daily volumes still well below $4 billion and buyers and sellers cancelling each other out, the price catalyst will come from without – the wider markets will impact crypto positively as participants begin to notice the negative correlation (moving in an opposite direction to equities) between bitcoin and  stocks.

Positive developments for the market are being ignored – such as the regulation news from Japan yesterday –but that won’t last as turmoil elsewhere sees an uptick in interest from the mainstream.

Certainly there is a search for safe havens at times like this. It would only require a tiny amount of the money sloshing around the financial system today to shift to bitcoin for the price to reverse the bearish trend. The key question is: will investors add BTC to their list of safe haven assets?


Correlation matrix

btc correlation

Source: Sifr Data

Sifr Data’s correlation matrix to 19 October shows vividly the negative correlation, and that’s before this week’s sell-offs have been taken into account.

It is on a log return basis  for of daily weighted volumes over 90 days. -1 is fully negative correlation and 1 is positive. BTC has negative correlation with the S&P 500 (SPX), the Cboe Vix (VIX “fear gauge, gold  (GLD) and TNX (10-year Treasury).

Cryptocurrency Correlation Matrix

The news has not seeped out but you can bet the smart money held by institutions is taking notice. We are do not have a crystal ball, but we have been witnessing over the past weeks a market that has now put in the bottom and looks like it is readying for take-off.

This is classic consolidation territory. The volatility has gone because the hot retail money has largely gone.

Bitcoin has plenty of room to grow in the institutional space too. Take up of bitcoin futures has pretty slow but according to comments in a Bloomberg report, the product has started in much the same way as the Vix did back in the day – the Vix is today one of the derivatives markets most popular instruments. It’s a slow burn.

Having said that the SEC called in VanEck and Solid X for a meeting about the proposed bitcoin ETF from the firms. The meeting took place on 9 October.

Market participants should to be adding to their bitcoin holdings at these prices, but a little at a time in a cost-averaging fashion to smooth returns.

 

About the Author

Gary McFarlane
Gary has been writing about cryptocurrencies since 2013 and currently works as the cryptocurrency analyst at interactive investor, the UK's second-largest online investment platform. Gary contributes for Coin Intelligence News in a personal capacity and none of his commentary should be considered investment advice. Gary is the winner of the ADVFN International Financial Awards 2018 Cryptocurrency Writer of the Year. Contact Gary on twitter at: @gary_mcfarlane

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