Weekly Market Analysis of Cryptocurrencies
We report the traditional weekly crypto market analysis based on the contribution by Aayush Jindal (Cryptonews.com). The analysis was made on June 19.
Bitcoin price saw an increase in selling pressure below $9,400. BTC followed a bearish path and traded below many major supports near 9,300.
On the downside: the price has opened the doors for more losses and might continue to move down towards the 9,050 and 9,000 support levels. Any further losses could lead it to 8,800.
On the upside: to start a decent recovery wave, the price must surpass 9,400. However, the main hurdle is still near 9,550.
Ethereum price reacted to the downside and traded below $232 and $230 support levels.
On the downside: ETH is approaching the 225 support, below which the bears are likely to aim a test of the 218 swing low. On the upside: the previous support near 230 and 232 are likely to act as hurdles. The key resistance to start a rally is near 235.
Bitcoin cash price failed to stay above $240 and started a downward move. BCH is approaching the 230 support.
On the downside: if the bears remain in action, the price could continue to move down towards the 220 support.
On the upside: the bulls are now facing a major resistance near 238 and 240.
Litecoin is following a bearish path and it seems like the price may even struggle to stay above the $42.2 support.
On the downside: in the mentioned bearish case, LTC could dive towards the 40.0 support. Any further losses could lead it towards the 38.0 pivot level.
On the upside: the 44.5 and 45.0 levels are key breakout zones.
XRP price failed to stay above the $0.192 and $0.192 support levels. The price is currently declining and trading well below 0.190.
On the downside: it seems like there are high chances of a move towards 0.182.
On the upside: the price must surpass the 0.190 and 0.192 resistance levels to start a fresh upward move.
In the past three sessions, a few small altcoins rallied more than +10,0%, including FXC, ERD, LEND, NEXO, RLC and HYN. Conversely, RUNE, ARK, CHSB, XVG and DGB are down more than -10.0%.
Bitcoin and S&P ‘Largely Uncorrelated’ and ‘Not Uncorrelated, Analysts Say
Fredrik Vold (Cryptonews.com) writes that “a look at a larger picture shows that bitcoin (BTC) and stocks have been uncorrelated for most of the coin’s existence, says an analyst, while another one adds that BTC is “not an uncorrelated asset.” It’s a matter of nuance, it seems.
The question of whether or not bitcoin is correlated with the stock market or any other traditional financial asset is a much-discussed topic in the cryptoverse. Many argue that the question remains important because it determines whether or not bitcoin should be held as part of a traditional investment portfolio – as is often argued by bitcoin proponents who deem it an uncorrelated asset.
PlanB, the pseudonymous creator of bitcoin stock-to-flow (S2F) model, argues that Bitcoin and stocks have been uncorrelated for a decade. However, the real tests come in the times of stress and crises, such as a financial crisis, or the Covid-19 pandemic, and the data he now presented imply that BTC is “not an uncorrelated asset.”
“I guess with Corona we have had one such test: BTC seems not uncorrelated. In fact, BTC looks like 416x levered S&P position to me,” writes PlanB. Bitcoin has been uncorrelated almost its entire life,” represented for example by its correlation of 0 on average to the popular S&P 500 stock index over the past 3 years, he says.
However, despite the lack of long-term correlation, Martin suggested that the situation has changed somewhat recently, with an increase in correlation with the stock market seen this year. According to Martin, “the peak” in correlation was seen around March 12 – the day often referred to as crypto’s Black Thursday – when he said all assets seen as “risky” sold off together.
This lack of correlation that bitcoin exhibits means that the cryptocurrency is “incredibly attractive in a portfolio” for investors who seek diversified exposure to a range of assets, claims the analyst.
Meanwhile, some also took to Twitter to comment on Martin’s opinion, with one user arguing that it is institutional investors that have made bitcoin more correlated with stocks this year. “For this correlation to return to 0, institutions will have to view BTC as a risk-off asset, not risk-on. Or they lose interest and go away,” the user wrote.
As reported in April, crypto research firm Coin Metrics said that unless “fundamental” changes occur in bitcoin and/or the S&P 500, the long-term correlation between the two will likely “return to levels of near zero.”
Outflows of Bitcoin From Miners Decline to Decade Lows
Omkar Godbole (Coindesk.com) reports that miner outflows of bitcoin have dropped to decade lows, with analysts suggesting a hoarding mentality is partly responsible.
“The seven-day average of the total amount of bitcoin transferred out of miners’ addresses declined to 987 on June 18, hitting the lowest level since Feb. 3, 2010, according to data source Glassnode. The previous decade low of 988 was registered on May 23.
The number of coins being sent by miners to exchanges is also at its lowest point in over a year, as noted by Glassnode in its weekly report.
“It is a sign of efficient miners continuing to hoard (only selling a proportion of BTC),” said Asim Ahmad, co-chief investment officer at London-based Eterna Capital.
The increase in miner holding does not necessarily have long-term bullish implications for the cryptocurrency’s price. Miners tend to operate mainly on cash and liquidate their holdings almost on a daily basis to fund operations.
As such, miner hoarding could be termed as temporary deferral of BTC sales, possibly due to fears that the market lacks the strength to absorb the regular amount of supply. Essentially, they may be waiting for the market to show strength and prices to rise before realizing their profits.
The market, therefore, could face an above-normal miner supply during the next meaningful price rise. That, in turn, could put the brakes on a price rally.
Hoarding aside, the other main reason for the decline in outflows is the reduction in bitcoin being mined since May’s reward halving, said Ahmad.
Indeed, transfer volume from miner addresses fell from 2,334 BTC to 1,034 BTC in the nine days following the May 11 reward halving, which reduced the per block emission by 50% to 6.25 BTC.
That sharp decline in profitability forced out less inefficient miners, as evidenced by a drop in the seven-day average of the hash rate – the total computing power dedicated to mining blocks on the blockchain. That fell from 120 tera hashes per second (TH/s) to 90 TH/s in the two weeks following halving (though it’s since climbed as more efficient machines were switched on).
Forced out miners, however, may return to bitcoin’s blockchain if prices rise sharply, making older hardware once again profitable.
Bitcoin has been largely restricted to a narrow range of $9,000 to $10,000 since mid May. The direction in which the range is breached will likely set the tone for the next big move”, the article concludes.