We’re almost there. It’s not yet full-blown but we’re towards the next bull run for sure! For most of the year, the world’s largest and most dominant cryptocurrency, Bitcoin, has noted a strong correlation with the world of traditional finance.
As disruptive as it is designed to be, Bitcoin is definitely gaining some ground in terms of legitimacy as it pivots towards the mainstream market. Banks are looking at their shoulders.
In fact, over the course of 2020, the S&P 500, Gold, and Bitcoin have been the focus of the market, given the growing uncertainty and some speculation with regard to Bitcoin’s robustness as a store of value and safe-haven asset.
The Cycle – Bull Run Followed by Bear Run
Like everything else, Bitcoin has its cycles. Bitcoin, like stocks, goes through cycles in its market; a bull run followed by a bear run, together, constitute a cycle.
So far, Bitcoin has undergone 3 cycles – 3 bull runs and 3 bear runs. However, while the 4th bull run seems to be on the verge of taking flight, there seems to be something interesting happening – the cycles are lengthening.
Interestingly, market data has highlighted yet a fairly new development for Bitcoin, as to its correlation with the S&P 500, with the same falling to zero – A radically different move given how the rest of the year has played out. In fact, this is the first time this has happened since May.
What Does this Bull and Bear Cycle Mean for the Cryptocurrency Market?
Bitcoin’s price has always benefited when it has exhibited low correlation stats with the world of traditional finance. At press time, Bitcoin was continuing to trade just below the $13K price level, after having surged by over 14% over the previous week.
While the correlation between the S&P 500 and BTC falling from 57 percent to close to 0 percent came as a welcome surprise, the reason behind it still seems to induce much debate.
The price hike definitely has played a part in the 30-day rolling average. However, there is also the possibility that this is just a momentary drop on the back of a fairly positive week for the crypto-market, one that saw one of the world’s largest payment service providers, PayPal, announced that they are extending support to cryptocurrencies like Bitcoin in 2021.
With Bitcoin’s growing independence in relation to other non-crypto assets established, is a bull run likely?
Interestingly, while the correlation with the S&P has changed radically, its correlation with gold, one of the key assets of traditional finance, continues to be quite strong.
For context, the highest price Bitcoin ever reached was $25,037 on December 11, 2017, during the “bubble boom” that saw early adopters gain widespread notoriety for trading their Bitcoin for Lamborghinis, high-end property and fame.
Bitcoin is on the Verge of the Bull Again!
Overnight, the now infamous cryptocurrency has been singing on a high tune, following the announcement that money transfer service PayPal would allow its users to trade using the digital currency.
Using the currency exactly like any other Forex, PayPal’s 26 million merchants will begin accepting Bitcoin as payment for goods from as early as February 2021.
It’s disappointing to know that there are still some financial ‘experts’ who believe that cryptocurrencies are not really the future of money.
The decision by one of the biggest payment companies in the world to allow customers to buy, sell and hold Bitcoin is yet another example that exposes Bitcoin deniers and cryptocurrency cynics as being on the wrong side of history.
Paypal’s adoption of Bitcoin and other cryptocurrencies provides that loud call to action to other financial institutions in embracing the digital cash or the so-called money or “currency of the future”.