Bitcoin Decouples From Traditional Equities: A New Era Begins

Bitcoin BTC/USD appears to have largely decoupled from traditional equities, as evidenced by its price trajectory no longer mirroring that of major indices such as the S&P 500.

This divergence is particularly noteworthy given the S&P 500's recent bounce off the 4200 points level, while Bitcoin had already reached the bottom of its current range, according to a Bitfinex report.

This phenomenon underscores the evolving dynamics between traditional financial markets and the cryptocurrency sector. Such developments and their implications for investors and traders will be a focal point of discussion at the upcoming Benzinga's Future of Digital Assets conference on Nov. 14.

The correlation between Bitcoin and the S&P 500 reached its zenith on Aug. 25, with a value of 0.8.
Since then, the correlation has been on a decline, with Bitcoin exhibiting slower upward movement compared to equities and more pronounced downturns throughout September.

Currently, the correlation value stands at -0.5, indicating that the two are moving in opposite directions.

Such decorrelation is typically observed when there's a sudden bullish or bearish development in either asset class, or when one market prices in information more rapidly than the other.

The S&P 500, for instance, closed above the pivotal 4300 level on Oct. 6, marking its second-largest daily increase since June 15 this year.

Meanwhile, the dominance of stablecoins in the crypto market has seen a slight dip, now accounting for 11-11.4% of the total crypto market cap.

Bitcoin's volatility has also made a significant entrance this October.

"As of now, the Implied volatility to Historical volatility ratio is 1.16, which, though a decrease from last week, still signifies that the market expects greater volatility. It's noteworthy that while the disparity between these metrics has narrowed, both measures have simultaneously risen on an absolute basis, indicating that expectations of future volatility are aligned with recent historical data but at a higher level than before," the Bitfinex analysts told Benzinga.

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Historical data shows a 24-hour volatility surge of over 340% on Oct. 2, with predictions suggesting that this trend will continue for the remainder of the month.

Since October's onset, Bitcoin's volatility has surpassed its average for the past 200 days.

Historically, volatility in the U.S. stock market precedes similar trends in other risk assets, including Bitcoin.

The VIX, which measures the S&P 500's volatility, hit its lowest point in three and a half years on Sept. 15, 2023, but has since rebounded past the crucial 18 level.

In terms of Bitcoin holdings, short-term holders (STH) — those who've held BTC for less than 155 days — have offloaded approximately 1 million BTC since April 13, 2023.

A significant portion of this, 200,000 BTC, was sold between Sep. 25 and 26.

On the broader economic front, the U.S. presents a mixed bag.

While the housing market is under pressure with declining mortgage applications and pending home sales, the manufacturing sector is showing signs of recovery.

The Purchasing Managers manufacturing sub-index recently reported its first expansion in almost a year.

However, the U.S. job market's foundation appears shaky, despite an uptick in job openings and employment growth.

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