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Bitcoin and gold are at their highest correlation ever, data shows

The case for Bitcoin as a proven hedge for the global equity market may have failed temporarily, at least per recent data.

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The case for Bitcoin as a proven hedge for the global equity market may have failed temporarily, at least per recent data.

Bitcoin, gold correlation reaches record high

Data analytics and media firm Bloomberg said in its latest crypto newsletter that as per recent findings, the correlation between Bitcoin (BTC) and gold is at its highest level since 2010.

Bitcoin and gold correlation. Image: Coin Metrics.

The findings come as Bitcoin, gold, and the broader financial markets have been one trade since March this year — everything dumped by over 40% that month over fears of the coronavirus, only to regain that value and surge higher in the coming months.

Same chart, different assets. Image: TradingView

As the above chart shows, regardless of the tracking service you use, the correlation of prices between Bitcoin and gold are similar. They start rising around the same date, show pullbacks and spikes on the same date, and start moving around the same dates as well.

However, despite their visual similarity, Bloomberg argued the correlation ratio isn’t exactly one.

“On a 12-month basis, the quasi-currencies are about 0.80 correlated, the highest in our database since 2010, explained Mike McGlone, the firm’s senior commodity analyst and author of the newsletter. He added:

“Bloomberg default and simple percentage change function. The percentage monthly changes on a rolling 12-month basis, past 12-months, the highest in our database.”

Meaning that instead of determining the correlation daily, Bloomberg calculates the interrelation of this data on a monthly basis, hence the difference.

Tech stocks behind the plunge?

Meanwhile, McGlone said that the recent plunge in Bitcoin and cryptocurrency prices last week were a result of a dip in the NASDAQ tech index, a collection of US-listed technology are infamous for their volatility and quick price movements.

However, he had good news for Bitcoin bulls. McGlone added that if gold were to maintain its price above the $1,900 level, Bitcoin was to similarly stay above $10,000.

While the development is odd considering Bitcoin’s ethos of being uncorrelated to fiat currencies or equities, the resemblance could be the result of trading firms operating similar strategies across asset classes, as quant trader Qiao Wang noted in a tweet:

Wang added it was likely high-frequency teams trading at short time intervals that were making the two asset classes correlate instead of a discretionary fund.  “Well look at the high-frequency data. The correlation is strong at a very high frequency / short time frame. It’s more likely algo than discretionary trading,” said Wang.

Posted In: Bitcoin, Trading

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Source: https://cryptoslate.com/bitcoin-and-gold-are-at-their-highest-correlation-ever-data-shows/

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Buyer of Jack Dorsey’s ‘genesis tweet NFT’ reportedly detained in Iran

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Iranian Cyber Police have reportedly arrested Bridge Oracle CEO Sina Estavi, according to a tweet pinned to Estavi’s Twitter account.

A rough translation of the tweet reads:

“The owner of this account was arrested on charges of disrupting the economic system by order of Special Court for Economic Crimes. Official judicial authorities will provide additional information.”

The same tweet is also pinned to the official account of Bridge Oracle, a Tron Network-based public oracle system. At the time of writing, the price of Bridge Oracle’s native token, BRG, has taken a sharp dive, crashing by more than 65%, according to data from TradingView.

Bridge Oracle is said to be a Malaysia-based blockchain company, but Estavi’s other venture, cryptocurrency exchange Cryptoland, was operating in Iran. Cryptoland’s Twitter account shares the same pinned tweet. No further information was shared publicly by the authorities.

Estavi is known for his heated bidding battle with tech entrepreneur and Tron CEO Justin Sun to buy Jack Dorsey’s first-ever tweet as an NFT. Twitter’s first tweet is dated March 2006 and reads, “Just setting up my twttr.”

In the end, Estavi successfully purchased the NFT for more than $2.9 million, or 1,630 Ether (ETH). Dorsey converted the proceeds to Bitcoin (BTC) and donated them to a charity organization in Africa.

Earlier this year, Estavi was sued by former Bitcoin.com CEO Mate Tokay for allegedly failing to pay him for his services. In his claim, Tokay also alleged that there’s an inconsistency between the purported and actual circulating supply of BRG.

Cointelegraph reached out to Bridge Oracle for comment. This article will be updated should they reply.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/buyer-of-jack-dorsey-s-genesis-tweet-nft-reportedly-detained-in-iran

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Bank of America to Settle Stock Trades on Paxos Network

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Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cryptobriefing.com/bank-america-settle-stock-trades-paxos-network/

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Is Bitcoin nearing another Black Thursday crash? Here’s what BTC derivatives suggest

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Bitcoin’s 51.4% crash in March 2020 was the most horrific 24-hour black swan event in the digital asset’s history. The recent price activity of the past week has probably resurrected similar emotions for investors who experienced the Black Thursday crash. 

Over the past week, Bitcoin’s (BTC) price dropped 29% to reach a three-month low at $42,150. $5.5 billion in long contracts were liquidated, which is undoubtedly a record-high in absolute terms. Still, the impact of the March 2020 crash on derivatives was orders of magnitude higher.

To understand why the current correction is less severe than the one in March 2020, we will start by analyzing the perpetual futures premium. These contracts, also known as inverse swaps, face an adjustment every eight hours, so any price gap with traditional spot markets can be easily arbitrated.

Sometimes, price discrepancies arise during moments of panic due to concerns about the derivatives exchange’s liquidity or market makers being unable to participate during times of extreme volatility.

Bitcoin perpetual premium/discount vs. spot price, March 2020. Source: TradingView

On March 12, 2020, the Bitcoin perpetual futures initiated a much larger descent than the price on spot exchanges. This move is partially explained by the cascading liquidations that took place, creating a backlog of large sell orders unable to find liquidity at reasonable prices.

The aftermath of the bloodbath resulted in futures perpetual contracts trading at a 12% discount versus regular spot exchanges. BitMEX, the largest derivatives market at the time, went offline for 25 minutes, causing havoc as investors became suspicious about its liquidity conditions.

By comparing this event with the most recent week, one will find that sustainable price discrepancies are very unusual. Even a temporary 12% gap doesn’t occur, even during the most volatile hours.

Bitcoin perpetual premium/discount vs. spot price, May 2021. Source: TradingView

Take notice of how the perpetual contracts reached a peak 4% discount versus regular spot exchanges on May 13, although it lasted less than five minutes. Market makers and arbitrage desks could have been caught off guard but quickly managed to recoup liquidity by buying the perpetual contracts at a discount.

To understand the impact of those crashes on professional traders, the 25% delta skew is the best metric, as it compares similar call (buy) and put (sell) options’ pricing. When market makers and whales fear that Bitcoin’s price could crash, they demand a higher premium for the neutral-to-bearish put options. This movement causes the 25% delta skew to shift positively.

Bitcoin options 25% delta skew, March 2020. Source: Skew

The above chart displays the mind-blowing 59% peak one-month Bitcoin options delta skew in March 2020. This data shows absolute fear and an incapacity to price the put (sell) options, causing the distortion. Even if one excludes the intraday peak, the 25% delta skew presented sustained periods above 20, indicating extreme “fear.”

Bitcoin options 25% delta skew, May 2021. Source: Laevitas

Over the past week, the skew indicator peaked at 14%, which isn’t very far from the “neutral” -10% to +10% range. It is indeed a striking difference from the previous months’ negative skew, indicating optimism, but nothing out of the ordinary.

Therefore, although the recent 29% price drop in seven days could have been devastating for traders using leverage, the overall impact on derivatives has been modest.

This data shows that the market has been incredibly resilient as of late, but this strength might be tested if Bitcoin’s price continues to drop.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/is-bitcoin-nearing-another-black-thursday-crash-here-s-what-btc-derivatives-suggest

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