Bitcoin (BTC): capital pending

Top-notch cryptocurrencies are currently aligned in a similar technical configuration: direct contact or proximity to a technical threshold, which could trigger an additional 20/30% correction or, conversely, finally allow the flow of buyers to return. When faced with such a threshold, the key will be the movement of capital flows.

Uneven bitcoin

Capital flows between asset classes

The asset management business of a stock exchange is based on two principles: the entry and exit of capital and the movement of capital between available asset classes. Most of the area is occupied by three main asset classes: stocks, bonds (credit) and cash. Liquidity is the least important on a relative level, the latter being collected for placement in the markets, stocks or bonds. Of course, this is an over-simplified diagram, and there are other asset classes that revolve around these three cores, which themselves have many subsections.

Historically, it is the constant movement of capital between stocks, bonds and cash that is the “life” of the stock market. and this is the place in this space that the crypto “asset class” is trying to create for itself. The development of futures contracts, options, ETFs, specialized crypto funds (for example, Grayscale) in bitcoin, ether and the company has made it possible, especially in the last 2 years, to open many management houses for investments in cryptocurrency. But the drop from last May shows that the situation is still fragile, and despite the technical thresholds currently being tested, such as $ 30k in Bitcoin, institutional capital is not being returned.

These are bonds that have been a hit since May last year.

While the stock market corrected for 2 weeks and the cryptocurrency fell for 3 months, it was the lending asset class that attracted the capital. Flows returned to buying sovereign and private interest rate contracts because yields recovered well over the year. This return of bond buyers also resulted in a 2-month decline in nominal interest rates. ; therefore, institutional investors use the loan for two months.

The class of cryptoassets will never be part of the ongoing arbitrage game that takes place between stocks / bonds / cash.but its still very young role as a diversifying asset class hasn’t had its last word.

The positive correlation with the stock market has ceased since the beginning of spring, as for loans, flows there will soon cease to be directed. Bitcoin price is testing $ 30k, this is the last technical pillar before the scenario of falling to $ 20k / $ 15k. To avoid the worst-case scenario, when the chartist falls below $ 20K, all that is required is a margin shift in institutional capital in favor of the cryptocurrency.

Chart comparing relative price dynamics bitcoin euro with 10-year US rates, CAC 40 and S&P 500 YTD.

In order to revive the machine, regardless of indicators and other approaches arising from prices, one thing is enough – one bullish breakout session with growing volume. Without such a session, plans for a comet are useless.

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Passionate about decentralization ever since I crossed the path to blockchain, I am trying to decipher the world of tomorrow and its paradigm shifts.


The comments and opinions expressed in this article are those of the author only and should not be construed as investment advice. Do your own research before making any investment decisions.

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