– Possible decoupling from risk-on markets

– ‘shadow-vesting’ occurring?

Bitcoin pushing near all-time highs

Above: Bitcoin (BTCUSD)

While I remain bearish in the short term for Bitcoin and the broader crypto market, I see some positive signs for the entire cryptocurrency market, which is a condition known as ‘decoupling.’ Decoupling is when a financial instrument stops trading the same way as another market. For example, when the US Dollar index rises, we see USDJPY and USCHF rise as well. In stocks, we can see the entire healthcare sector rise while some tech companies with exposure in healthcare can also rise. Bitcoin’s price action is very correlative to equity markets and moves more often with stocks than any other market. However, there is some divergence occurring between Bitcoin and the stock market. At the time of writing, the NASDAQ is down -1.10%, S&P 500 down -0.80%, and the Dow down -0.75%, but Bitcoin is up a little over 0.10% and pushing new all-time highs near $53,000. Even the whole cryptocurrency market cap is up +1.09%, with the alt-coin market cap up over 3%. Is this a sign of decoupling? I do believe that it is some early evidence that we may see cryptocurrencies move on their own and in a non-correlative nature to equities, but I also think it is too early to tell.

Listen, there’s a metric ton of recent speculation going on in global markets. It’s as if everyone and their dog and their kitchen sink has decided to throw money into any market. It’s straight-up gambling. The SPACs in stocks, the GameStop squeeze, and a myriad of other speculative and risky ventures with massive new participants are among the hallmarks and warnings of a bubble. And the bubble is across all asset classes – except for cryptocurrency. Ask yourself this question: when the stock market collapses and commodities collapse, where do institutions put their money? Usually, they go to cash – which might be attractive in the future with rising interest rates (oh ya, inflation is coming up and coming up fast). But major institutions with leverage won’t convert to buy and hold overnight – they will still look for significant gains and yields. Which market can provide that? Cryptocurrency. It’s the newest financial space and the newest asset class. Trillions of dollars will pour into the cryptocurrency market as traditional money experiences its own FOMO moment. It’s actually quite exciting that people like you and me are already in it – well before the professionals have even considered jumping in. We’ll be sitting pretty while the big boys and girls dump trillions into a new asset class that all of has have been accumulating, for some, over a decade.

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