Bitcoin: An Embrace of Risk? - Mine Digital
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Bitcoin: An Embrace of Risk?

November 16, 2020 • 
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With significant event risk, each event with binary outcomes it is a tricky time for market analysis. Despite this, a risk-on trade may emerge.

Data

There is clear bias in the data the last week – as there has been a lot of this year – of asset price increases. Orange juice, ethanol and lumber are all significantly higher with other reasonable increases across soft commodities, some energy and stocks.

Capital Markets

We have seen some interesting price action in capital markets the last week. The S&P500 had been rallying from election day onwards and had begun to look like unusual price movement until news of the coronavirus vaccine emerged.

The trade to be long risk into the announcement would have been very crowded with it being well-known information that would have certainly found its way into markets.

But the interesting price action came after the announcement, in which the price retraced but not nearly enough to what was expected after making a new all-time high and a rally of over 10% on insider information.

Besides that, the promise of a Biden technocracy is a mixed bag where there is noise being made of coronavirus lockdowns alongside of the promised stability and expert opinion – which is the kind of thing that would see more liberal monetary and fiscal policy in this environment.

In any case, with December around the corner, the rest of the year and early next year could be volatile before potentially settling into a one-way trade in 2021 of embracing risk (and we might see this earlier, but the coronavirus question is still yet to be answered).

Bitcoin

Bitcoin has been one of the star performers in global markets October and so far in November with new highs being made, all technical resistance being taken out and the market generally looking at all-time highs.

However it has been a slower week for BTC. Despite trading strongly there has been less momentum in the asset – which is reasonable given that the committed short sellers were blown out in those moves that did have momentum.

BTC/USD Chart: Daily

Digital Assets

Although digital assets have been generally flat in the last week, some protocols such as Uniswap, Aave, YFI and compound have done well.

The bid has mostly been in DeFi assets, but most likely the Bitcoin move must be finalised – probably through the high – before more attention will be given to other sections. For DeFi, it had been coming off a low base.

Volume

Sentiment

Crypto sentiment has been at extreme greed for the last week in a sideways market.

There has been some commentary around the Bitcoin move making little impact in the media and little retail interest so far.

BTC Dominance

The recent run in BTC is shown in the context of the entire asset class here. Not a great deal of takeaways are obvious at face value, where similarly to the BTCUSD price action, the chart sits in a no-mans land.

Money

There has been a bit of a break in market correlations the last week. The USD index DXY had made a strong reversal higher and since faded almost back to where it began.

Gold has been weak but also did not recover well at all in its price action.

There is a bit of a mystery around these movements and their correlations. We wonder if it can be explained by an open embrace of risk after Biden’s election and the vaccine news – is more monetary and fiscal intervention inevitable, but also in an open embrace of risk – even a melt-up? This might explain this type of market price action.

USD

Gold

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