For more than a year bitcoin and stocks have moved in tandem, with the Nasdaq index in particular being a leading indicator of bitcoin’s price movements.

For nearly a month however, it is bitcoin that has been leading, and stocks have either followed or like today Nasdaq is again in red.

The tech heavy index is slightly down by only 0.3%, but that would still have had an effect on bitcoin prior to last month.

Bitcoin instead went on to break $30,000, one of the biggest resistance level and perhaps the biggest excluding all time high resistance.

It took months of course since June, as well as a dive in November, and another month long sideways at $28,000, but breaking it while the tech index is a bit down changes the relationship and the change might be structural.

The decoupling, if it turns out to indeed be so as it is still only weeks old, began on or around March 12 amid banking collapses in the United States.

Until that point, it was fashionable in trading houses and commentaries to treat bitcoin as a high growth risk on asset, like startups with big potential but without profits such as poor Lilium which has been decimated.

The banking collapse however revealed or reminded the new class of investors in Wall Street and more broadly that you can’t categorize bitcoin so easily.

It is a risk on asset and has the potential for high growth but it is a bit like gold too and outside of the banking system, as well as actual money with billions in global trade carried out in BTC and crypto.

Just what aspect of crypto usage makes up bitcoin’s evaluation is difficult to estimate, but we can start off with discounting about 95% of some circa $15 trillion in yearly on-chain volumes which is mostly on and off ramp to exchanges.

That leaves about half a trillion. We can cut it by 5 just because, and still end up with what feels like a pretty high $100 billion for commerce.

What part of that $15 trillion is then gold like investors or start-ups like investors, or indeed art like investors and so on, becomes an exercise of just picking numbers out of the air, but all those investors are found in bitcoin.

You then have ‘meme’ investors, like our Elon Musk or Dogecoin. As well as what we’ll term ‘ideological’ investors or users for a lack of better term, this being… well originally and most famously Wikileaks in 2011 when it was cut off from banking, and most recently the Canadian Freedom Convoy protest against lockdowns and mandates.

This makes bitcoin and crypto more widely a sui jeneris. In practice that sometime has the effect of temporary correlation. Sometime with stocks, sometime with gold, and sometime with inflation… well frontrunning it as it did in 2020-21.

The Not a Bank Inverse Correlation

For now and anyone’s guess for how long, bitcoin is in an inverse correlation of sorts with banking as a function.

The collapse of the three US banks and the European Credit Suisse, is kind of history in headlines but the continued action by bitcoin is potentially telling us something.

It is easy to read too much into it as there are plenty of other factors that affect bitcoin’s price, and no depositor lost money in all four bank crisis, but it may be that while the headlines have moved on, investors/depositors maybe have not.

Some estimate that the effects of rising interest rates in the United States won’t clear out until some months into next year presuming the Federal Reserve Banks are done with hiking, which is what most assume at this point as the market probably doesn’t care about another 0.25% or 0.1%.

That leaves a period of uncertainty for the banking sector in particular, with the commercial real estate sector also some suggest likely to go through some repricing.

Banks therefore, though not in an acute crisis at this point, are probably perceived as riskier than prior to March, and though attention has moved on, the perception might have not.

As the only usable asset in the digital era that performs banking like functions to some extent, bitcoin by relation might now be perceived as safer than prior to March.

The crypto therefore might be back to its comfort zone, and that is as a diversifier. At this stage, it doesn’t quite correlate but front-run.

Some call this diversifier aspect a safe haven, or a hedge, but the latter in particular isn’t too correct as bitcoin doesn’t correlate, and a safe haven is not quite the same as an alternative which is what bitcoin is.

And that function as an alternative has gained renewed attention, explaining its decoupling because stocks don’t perform that function.

If this analysis is correct, then the momentum might be self-perpetuating beyond the spark, which in effect means bitcoin has changed, structurally, once again.

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• Source: https://www.trustnodes.com/2023/04/11/bitcoin-decouples-from-stocks