Understanding Bitcoin’s Evolution

Recent insights from Bloomberg Intelligence reveal a striking shift in the behavior of Bitcoin (BTC), suggesting it may start to mirror the characteristics of traditional assets like United States Treasury bonds and gold. This revelation comes from their August “Crypto Outlook” report, authored by senior commodity strategist Mike McGlone and market structure analyst Jamie Coutts.

Macroeconomic Influences at Play

Both authors pointed out the significant impact of macroeconomic factors, particularly the Federal Reserve’s monetary policies, on Bitcoin’s market dynamics. They noted, “Tightening markets and plunging global growth support the Federal Reserve’s shift to a ‘meeting by meeting’ bias in July, which may help pivot Bitcoin toward a directional tilt more like US Treasury bonds than stocks.” Instead of being viewed solely as a high-risk asset, Bitcoin might be finding a more stable place among traditional investments.

The Comparison: Bitcoin vs. Traditional Assets

• Treasury Bonds: Long-term government securities that offer fixed returns.
• Gold: Historically a safe haven asset, revered for its stability.
• Oil: A commodity known for its volatility yet essential nature.

Bitcoin seems to exhibit a “dump-following-pump nature of commodities,” echoing behaviors seen in both bonds and gold, especially as inflation begins to recede. The ongoing comparison between these assets highlights Bitcoin’s maturity in the financial landscape.

Current Market Metrics

As of the time of writing, Bitcoin is trading slightly higher at $23,150, having recently reclaimed the 200-week moving average, which stands at $22,827. This recovery is noteworthy, considering the cryptocurrency was a staggering 70% below its peak early in August, yet still remarkably five times above its March 2020 lows. Such metrics beg the question: Is Bitcoin establishing a strong foundation for future growth?

Support Levels and Future Projections

The analysts pointed to the $20,000 zone as a crucial support level and believe it resembles the base formation seen at the $5,000 mark during the 2018-19 downturn. They concluded, “We think more of the same is ahead, particularly as it may be transitioning toward global collateral, with results more aligned with Treasury bonds or gold.” In other words, Bitcoin could be gearing up to embrace its new identity as a more stable asset.

The Bigger Picture: Crypto and Stock Correlation

Additional research from Coinbase has drawn parallels between the risk profiles of the crypto asset class and those of oil and tech stocks. According to Coinbase’s chief economist, the correlation between stock prices and crypto assets has significantly increased since the pandemic commenced. This can make both markets more reactive to economic shifts, creating opportunities and risks alike.