In recent months, Bitcoin has demonstrated remarkable resilience in the face of turbulent markets in traditional finance. Unlike in the past, where Bitcoin’s price was closely tied to macroeconomic catalysts, recent developments suggest that it has become increasingly decoupled from traditional financial entities.
Decoupling from Traditional Finance
Recently, the Federal Reserve‘s hints of an impending interest rate hike have caused uncertainty in traditional financial markets. This, in turn, resulted in equity indices like Nasdaq 100 and S&P 500 declining significantly. Bitcoin remained resilient in parallel to this, however, maintaining its position around the $26,500 mark, with marginal weekly gains of 0.02% based on CoinMarketCap data.
Bitcoin’s decoupling from traditional finance is further underscored by its correlation with the US Dollar Index (DXY), which recently hit zero per data provided by IntoTheBlock. This lack of correlation shields Bitcoin from the movements of the US dollar, a trend typically triggered by interest rate hikes by the Federal Reserve.
As foreign investors seek safer havens during such times, Bitcoin, now less influenced by these external factors, has become more sensitive to developments within the crypto space.
Crypto-Related Events Catalyzing Movements
Bitcoin’s recent significant rallies have largely been fueled by news related to Bitcoin spot exchange-traded fund (ETF) applications. These events include Grayscale’s victory against the US Securities and Exchange Commission (SEC) and delays in decisions on multiple ETF filings.
As a result, many Bitcoin holders have patiently awaited outcomes related to these applications before making significant moves in the market. Whether their diamond hands will eventually pay off remains to be seen, but the overall sentiment of the crypto community is on a positive note.
Reduced Sell Pressure
Another key development that has contributed to Bitcoin’s stability is the decision by the defunct crypto exchange Mt. Gox to extend its repayment deadline to October 2024. Mt. Gox’s bankruptcy, resulting from a massive theft of nearly 850,000 BTC, had left the market uncertain about the scale of repayments.
The extended deadline, however, has provided a degree of reassurance to investors and helped stabilize sentiments within the crypto community.
Growing Dominance in the Crypto Landscape
Moreover, Bitcoin’s steadfastness can also be attributed to its increasing dominance within the crypto landscape. In recent weeks, Bitcoin’s market share surged to 50%, marking the second time such a milestone was achieved in 2023.
This growing gap between Bitcoin and its closest competitor, Ethereum, is an indication of Bitcoin’s maturity and stability. Larger-cap cryptocurrencies tend to be less volatile than their smaller counterparts, contributing to Bitcoin’s overall stability.
Long-Term Holder Confidence
One of the most compelling reasons behind Bitcoin’s steady performance is the unwavering confidence displayed by long-term holders (LTH). These experienced investors have taken advantage of bear market conditions to accumulate Bitcoin over time.
Data from Glassnode reveals that the dormant supply of BTC has reached new highs in 2023, with long-term holders accounting for a substantial portion of the total supply. In fact, at the time of writing, approximately 75% of the total circulating Bitcoin supply is under the control of these steadfast long-term holders.
In conclusion, Bitcoin’s ability to withstand the turbulence of traditional financial markets can be attributed to its growing independence from external factors, its responsiveness to crypto-specific triggers, reduced sell pressure resulting from extended repayment deadlines, and its increasing dominance within the cryptocurrency landscape. Additionally, the unwavering confidence of long-term holders serves as a strong pillar of support.
While Bitcoin’s resilience is evident, it remains to be seen how it will navigate the challenges of the upcoming halving event and the anticipation surrounding spot ETF approvals in a potentially bullish market. Nevertheless, the cryptocurrency’s ability to adapt and thrive in varying economic climates continues to solidify its position in the financial world.
Giancarlo is an economist by profession with a career spanning nearly two decades. His professional journey has seen him assume vital roles in various government and private organizations such as the Department of the Interior and Local Government (DILG), the National Economic and Development Authority (NEDA), Megaworld Corporation, and the China Banking Corporation in the Republic of the Philippines.
In addition to his civic and corporate pursuits, his forward-thinking approach has led him to manage several prominent websites in the banking and finance sector, notably the Australia-based RateChoice, where he immersed himself in the world of emerging financial technologies and where he found particular interest in Bitcoin all the way back to 2013.
Prior to his addition to Blockzeit’s dynamic team, he held an essential role as Project Manager for initiatives encompassing blockchain, stablecoin, mining, special economic zone development, and iGaming. This noteworthy chapter in his career unfolded under the auspices of InPlan Consultancy Services, Inc., the think-tank of IMPERO Consortium Management Corporation headquartered in Manila, Philippines, and Tokyo, Japan. InPlan, led by a distinguished retired Cabinet member of the Philippines, collaborates directly with IMPERO’s core management team, contributing to strategic planning and business development endeavors.