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It Turns Out That The World’s Largest Crypto Is Increasingly Moving In Coordination With Global Market Forces

A new crypto market research from Bloomberg Intelligence showcases that the biggest crypto to date, Bitcoin, may turn out to mimic the behavior of United States Treasury bonds and gold, rather than stocks.

The “Crypto Outlook” research paper, written by senior commodity strategist Mike McGlone and senior market structure analyst Jamie Coutts, compares the Bitcoin market with several traditional markets like those of the physical gold, bonds, and oil.

The research also highlighted that Bitcoin and Treasury bond markets behave similarly to macroeconomic influences such as the Federal Reserve’s monetary policies and the latest interest rate hikes by the Fed.

“Tightening markets and plunging global growth support the Federal Reserve's shift to a ‘meeting by meeting’ bias in July, which may help pivot Bitcoin toward a directional tilt more like US Treasury bonds than stocks.” the research stressed.

McGlone added on Twitter that Bitcoin and Ethereum may turn out to be the primary winners in a “boom and bust” situation, where the “dump-following-pump nature of commodities” and receding bond yields may return an increase in the chance of bonds and gold and Bitcoin being buoyed as inflation goes down.

Crypto markets are recovering

Interestingly, crypto markets traded at their greatest-ever discount, when compared to the 100-week moving average in July. It is uncommon for Bitcoin “to hold much below its 200-week moving average,” the report emphasized. Indeed, the current Bitcoin price of $22,942.74 is just above the 200-week moving average, which lies at $22,827, correcting from a daily high of $23,500.

Bitcoin priceSource: CryptoBrowser

And despite the turmoil in the past three months, the world’s largest crypto managed to stay above the March 2020 lows, which, according to the research paper, “shows its potential”. Nevertheless, the dominant crypto is still 70% below its peak at the start of August.

“We think more of the same is ahead, particularly as it may be transitioning toward global collateral, with results more aligned with Treasury bonds or gold,” the researcher added, stressing that had been one of the best-performing assets since its inception about a decade ago.

Furthermore, a Coinbase research, published in July, showcases that the risk profile of the crypto asset class is similar to that of oil and tech stocks, with Coinbase chief economist Cesare Fracassi stating that “the correlation between the stock and crypto-asset prices has risen significantly” since the 2020 pandemic.

Price action normalizes

The past week saw many of the crypto projects making up some of the losses they recorded over the past couple of months. However, the 20% rally ended, as most cryptos reverted to calmer territory, adding or erasing a couple of percent on the day, while still many cryptos remained with positive weekly price action.

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