Jorg Hiller
09 Sep 2024 14:35
Bitfinex Alpha shows correlation between Bitcoin and stocks, while altcoins outperform during market downturns
According to a recent report from Bitfinex Alpha, Bitcoin (BTC) continues to show a strong correlation with traditional stock markets, particularly the S&P 500, while altcoins are showing remarkable resilience.
Bitcoin’s Downtrend
Last week, Bitcoin saw a significant decline, dropping 10.7% in the first week of September. This continued the downward trend observed since late August, with the price falling below the critical level of $56,711 that had previously triggered a rapid recovery. Selling has reduced leveraged positions, indicating that the market is potentially approaching a local bottom.
However, the report suggests that Bitcoin’s short-term trajectory is still heavily influenced by the performance of the U.S. stock market, with the S&P 500 posting its worst weekly performance since March 2023, highlighting the persistent correlation. Bitcoin Price And traditional financial markets. It is noteworthy that since August 27, there has been a net outflow of $761 million from Bitcoin ETFs, indicating that traditional financial investors are reducing their risk in cryptocurrencies.
Altcoins are performing better
On the other hand, the altcoin market has been resilient even amid Bitcoin’s decline. Bitcoin dominance, which measures BTC’s market capitalization over the entire cryptocurrency market, has decreased by 1.3%. In contrast, the market capitalization of all other crypto assets outside the top 10 has increased by 4.4%. This shift suggests that investors are seeking value in altcoins, rather than the typical pattern of rushing into Bitcoin during a downturn.
Despite this resilience, altcoin open interest has fallen 55% from its all-time high, suggesting speculative apathy and potential seller exhaustion. The ETH/BTC ratio, a proxy for altcoin markets, remains below its 365-day simple moving average, reflecting Ethereum’s overall underperformance since the merger.
However, if Bitcoin’s dominance has indeed reached a local peak, we could see a period of altcoin strength in the coming months, with a bullish Q4 outlook if macroeconomic pressures ease.
Macroeconomic impact
The main catalyst for last week’s selloff was the August U.S. labor market report, which showed only modest growth. The report provides some reassurance as the Fed prepares for a possible rate cut. The employment figure rose less than expected, but the unemployment rate fell to 4.2% from 4.3% in July.
In the manufacturing sector, there was evidence of a sustained contraction for the fifth consecutive month due to weak demand, which supports the rationale for the rate cut. Companies are cutting production to protect profit margins, reflecting the overall slowdown in economic activity.
The construction sector is also showing signs of strain. The U.S. Commerce Department’s Census Bureau reported that construction spending fell 0.3% in July, after remaining flat in June. The decline reflects a general slowdown in the housing market, with sales being affected by the waning demand for affordable housing and the pandemic-era housing boom.
Further development
In other news, Japan’s three megabanks (MUFG, SMBC, Mizuho) have launched “Project Pax,” a pilot program to streamline cross-border payments using a blockchain-based stablecoin, with a target commercial launch by 2025. The project will integrate with SWIFT’s API framework for compliance and efficiency.
Meanwhile, the Federal Reserve has issued a cease and desist order to United Texas Bank due to its lack of risk management and anti-money laundering practices for cryptocurrency customers. The bank has been ordered to improve its supervision and customer due diligence procedures.
For more details, check out the full report from Bitfinex.
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