ARK: “Bitcoin’s Correlation With The S&P 500 Reached” ATH, Opportunity Knocks

This counterintuitive thinking by ARK Investment is the reason why we subscribe to their  “The Bitcoin Monthly” report. While everybody complains about bitcoin’s dance in unison with the stock market, they keep it cool and even frame it as an opportunity. Which it is. It’s not ideal that traders treat bitcoin like a risk-on asset, but there’s certainly logic behind it. Short-sighted people see bitcoin as an investment vehicle and little else.

Excited to introduce the first official issue of “The Bitcoin Monthly”

Starting this month, ARK will be publishing an in-depth report covering Bitcoin’s market action and sharing where we think the market's headed.

Here are the major highlights from this month’s report:

— Yassine Elmandjra (@yassineARK) June 3, 2022

In our first article about “The Bitcoin Monthly,” we defined it as:

“Over at Twitter, ARK Analyst Yassine Elmandjra described “The Bitcoin Monthly” as: “Starting this month, ARK will be publishing an in-depth report covering Bitcoin’s market action and sharing where we think the market’s headed.” On ARK’s website, they describe the new venture as: “Considering the market’s fast pace of change, ARK publishes The Bitcoin Monthly, an “earnings report” that details relevant on-chain activity and showcases the openness, transparency, and accessibility of blockchain data.”

BTC p- S&P500 Correlation | Source: “The Bitcoin Monthly”
ARK On Bitcoin’s Correlation With The S&P 500

When the Russia/ Ukraine conflict started, it seemed like bitcoin was not in synch with traditional markets anymore. However, the tide quickly turned. By May, “Bitcoin’s correlation with the S&P 500 reached an all-time high of 80%.” The previous ATH was way back in October 2020, near that magical time when bitcoin woke up from a hundred years’ nap to pass the $20K line for the first time. 

"If your time horizon is one month, Bitcoin looks like a volatile asset. If your time horizon is 10 years, it looks like a risk-off store of value."

– @saylor

I couldn't agree more.

— Dr. Jeff Ross (Pleb counselor) (@VailshireCap) June 15, 2022

So, what’s ARK ‘s take on the situation? Well…

“Based on fundamentals, we believe bitcoin and most equities should not be highly correlated, highlighting a potentially significant market inefficiency.”

A “significant market inefficiency” is an investor’s wet dream. It means that you’re seeing something that the market’s not. It means opportunity. If you play your cards right, it could mean money. How to use that “significant market inefficiency” in your favor, that’s another question altogether. Take into account that “Bitcoin still faces an uncertain macro environment, as the global economy shows signs of a recession,” though.

Let’s also take into account these recent words by MicroStrategy’s Michael Saylor, “If your time horizon is one month, Bitcoin looks like a volatile asset. If your time horizon is 10 years, it looks like a risk-off store of value.” Apparently, bitcoin traders suffer from high time preference. And that probably explains the correlation with the S&P 500.

BTC price chart for 06/16/2022 on Binance | Source: BTC/USD on TradingView.com
Arcane Research Weights In

ARK isn’t the only game in town. Our friends at Arcade Research have the most recent information regarding bitcoin’s correlation with the S&P 500, “BTC followed U.S. markets closely on Friday and, in extension, also during this weekend. However, as prices plummeted, new ghosts emerged, and the dangers of impactful insolvencies have contributed to further drag on the crypto market,” they say in “The Weekly Update’.”

When Arcane Research says “ impactful insolvencies,” they certainly refer to the Celsius case.

“While the crisis in Celsius has contributed to putting a further drag on the market, the initial catalyst was the inflation surprise in the U.S. We note a decline in the 90-day correlation between BTC and S&P 500. However, short-term correlations grew heavily following Friday’s inflation news – with the market preparing for more hawkish policies enacted by the FED.”

The fact of the matter is that bitcoin’s price is determined at the edges of the network. And high time preference people are trading there. And if they want to treat bitcoin as a risky asset, there’s nothing anyone can do about it. Except, somehow, taking advantage of the opportunity it brings.

Featured Image by Sergei Tokmakov Terms.Law from Pixabay | Charts by TradingView and “The Bitcoin Monthly”

ARK Invest: Despite The 9 Red Candles, “Bitcoin’s Fundamentals Remain Strong”

The inaugural edition of ARK ’s “The Bitcoin Monthly” report contains some gems. It also contains a simple compilation of facts that paint a clear picture of the bitcoin market as it currently stands. A blockchain is an unalterable fountain of evidence, and ARK put their best analysts to review it in-depth and get stats and insights for us. Get some coffee and take a seat, let’s forget about the Fear & Greed index and see what the numbers are really saying.

Excited to introduce the first official issue of “The Bitcoin Monthly”

Starting this month, ARK will be publishing an in-depth report covering Bitcoin’s market action and sharing where we think the market's headed.

Here are the major highlights from this month’s report:

— Yassine Elmandjra (@yassineARK) June 3, 2022

Over at Twitter, ARK Analyst Yassine Elmandjra described “The Bitcoin Monthly” as: “Starting this month, ARK will be publishing an in-depth report covering Bitcoin’s market action and sharing where we think the market’s headed.” On ARK’s website, they describe the new venture as: “Considering the market’s fast pace of change, ARK publishes The Bitcoin Monthly, an “earnings report” that details relevant on-chain activity and showcases the openness, transparency, and accessibility of blockchain data.”

Related Reading | Bitcoin Price Closes Two Consecutive Weekly Red Candles, First Time Since Bottom

Let’s check the data and insights available in May’s edition.

The State Of The Bitcoin Market, With ARK

According to “The Bitcoin Monthly”:

  • “Bitcoin closed the month of May down 17.2%, declining from $38,480 to $31,835.”

Let’s be honest, this looks like the beginning of a bear market. And the Terra/ Luna crash appears to be the catalytic event. However, subsequent data will show that we might not be in one after all. 

  • “Bitcoin closed the month down 17.2%, printing its ninth consecutive negative weekly decline for the first time in history, suggesting a possible oversold condition.”

Nine consecutive red candles, a new record. That’s a horrific fact no matter how you dress it. However, according to ARK, it suggests “a possible oversold condition.” Which is promising. 

  • “Bitcoin is down 57% since reaching an alltime high in November 2021. For perspective, the average peak-to-trough drawdown during previous bear markets stands at 76%.”

Does this mean things could get worst? Or does it mean we’re not near bear market levels? It definitely feels bear-markety, but the stats are the stats. 

BTC price chart for 06/04/2022 on Exmo | Source: BTC/USD on TradingView.com
The Bitcoin Network Stands Strong

  • “Despite the continued sell-off, bitcoin has not broken below any major trendline. It is trading above its onchain cost basis at ~$24,000 and its 200- week moving average at ~$22,000.”

The bitcoin network absorbed Terra/Luna’s massive sell-off and the market’s subsequent one like a champ. The worst seems to be behind us and bitcoin “has not broken below any major trendline.”

  • “An all-time of nearly 66% of bitcoin’s supply has not moved in over a year, a testament to the market’s longer-term focus and a holder base with stronger conviction.”

Despite the massive market movement, bitcoiners keep HODLing like it’s the only chance at economic freedom that they’ll see in their lifetimes. Because it is.

  • “Short-term holder positions fell -35% below their breakeven price, on average.”

If bitcoiners are HODLing, who’s selling all those cheap sats? Short-term holders, that’s who. And they’re not even close to breaking even. It’s a short-term holders massacre out there.

ARK Sees A Way For The Market To Jumpstart Itself

Look, hear ARK out. First of all, “bitcoin’s open interest in the futures market has reached an all-time high of approximately 450,000 BTC.” Also, “perpetual contract basis typically hints at market direction. Currently, it is trading at a bullish discount to spot.” This is very important because, “given the high open interest outstanding, we believe the perpetual futures discount indicates a potential upward trajectory in BTC’s next major price movement.”

Related Reading | Revisiting Dorsey’s Hyperinflation Tweet: Elon, Wood, Saylor, Balaji, Chip In

That’s right, ARK closes “The Bitcoin Monthly” report predicting “a potential upward trajectory.”

Featured Image by Ricardo Gomez Angel on Unsplash | Charts by TradingView