The renowned analyst Willy Woo believes that the decline in the correlation between the leading cryptocurrency and stock-market dynamics confirms his September forecast that Bitcoin would regain its status as a safe asset.
First signs of de-coupling behaviour spotted between BTC and stocks.
Buying from an influx of new users provides price support preventing speculators from trading the correlation downwards.
NVTP approximates a valuation for BTC with organic investor velocity on the blockchain. pic.twitter.com/AvilB9cfdD
— Willy Woo (@woonomic) October 29, 2020
A surge in new users provides price support, preventing sales driven by the correlation with the S&P 500. This decoupling emerged after the NVT Ratio indicator continued to rise to a new all-time high of $11,000 as markets fell.
NVT Ratio shows how much Bitcoin’s market price corresponds to its demand as a means of payment. Read more about the indicator via the link.
In September, Woo predicted a similar scenario. He emphasised that it would be driven not by changes in Bitcoin’s perception as a hedge against risk, but by the internal adoption of an S-curve, characteristic of a startup’s lifecycle.
Another explanation of this, from 2 months ago when we were doubtful it would happen:https://t.co/8alxtk3WG9
— Willy Woo (@woonomic) October 29, 2020
Recent days’ events lead the expert to expect that Bitcoin may hold its current levels even if stocks fall sharply.
“The current test shows that an inflow of new capital into the leading cryptocurrency will create the conditions for it to retain its safe-haven properties,” the analyst says.
Note that stocks may continue to rise, if that’s the case the notion of de-coupling is not so important. What this test shows is that if stocks crash, Bitcoin powered by its large adoption s-curve, swallowing ever more capital, will present perfectly good safe haven properties.
— Willy Woo (@woonomic) October 29, 2020
Skeptics drew Woo’s attention to the fact that such ‘decouplings’ had previously been short-lived. One of them argued there was no reason to doubt that cryptocurrencies follow the stock market.
We already had some decouplings between #BTC and #DJI. They all were short-lived. Macro rule was (and still is): crypto goes up — stock markets go up. Stocks go down, so the crypto.#Bitcoin #DowJones #Dow #crypto pic.twitter.com/G5r3pQI05v
— Coingilla (@coingilla) October 29, 2020
In May, Amsterdam Stock Exchange trader Michael van der Poppe urged not to bet big on changing the correlation between the S&P 500 and Bitcoin. He noted that during market turbulence all assets tend to move in tandem.
“After the March meltdown gold, silver and Bitcoin really held up against any downside moves and showed strength relative to the stock markets. Do not tie yourself to these correlations,” he said at the time.
When shit hits the van (which was in March), all correlations tend to go towards 1.
Sinc then, gold, silver & #Bitcoin have been resilient for any downwards move and showing strength apart from the equity markets.
Don’t pin yourself on those correlations.$BTC
— Crypto Michaël (@CryptoMichNL) May 14, 2020
According to BlockchainCenter, from October 14 to 30, Bitcoin’s correlation with the S&P 500 fell from 0.47 to 0.30.
Earlier The Block analyst Larry Chermak concluded that Bitcoin’s correlation with the S&P 500 strengthens in falling markets.
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