Bitcoin surged past $42,000, hitting a 19-month peak amid a global market downturn, showcasing its detachment from traditional assets. While stocks and bonds faced losses, Bitcoin maintained its rally, rising 5.8% on Monday and holding strong in Tuesday’s Asian trading.
Sean Farrell from Fundstrat Global Advisors highlighted this divergence, pointing out Bitcoin’s decreasing correlation with traditional macro assets. In 2023, Bitcoin’s ties with stocks and gold have weakened, propelling a 152% ascent due to crypto-specific factors and the anticipated approval of the first US spot Bitcoin exchange-traded funds.
Correlation coefficients between Bitcoin and global stocks, as well as gold, have notably decreased, emphasizing the dwindling relationship between these assets. Meanwhile, industry-specific factors, like regulatory relief in the US, have further boosted market sentiment.
Yet, some indicators suggest Bitcoin’s surge might be overstretched, with technical metrics signaling potential overbuying. The anticipation of a green light for US spot Bitcoin ETFs by the Securities & Exchange Commission (SEC) in January and speculation about Federal Reserve interest-rate cuts next year continue to fuel speculative interest.
Despite the momentum, the sustainability of Bitcoin’s rally remains uncertain, hinging largely on the SEC’s ETF decision. As of now, Bitcoin trades at around $41,772, with other cryptocurrencies like Ether and BNB showing minimal movements.
