Market Regime Change! BTC could go lower, see why

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by Marco Rossi

10/9/19

Following the sudden crash in value of BTC, on 9/24, the cryptomarket got even more interesting.

After the first decade of rule, we could be witnessing a most relevant overturn of BTC as the primary — and for many only — cryptocurrency out there.

First, in the last month we saw BTC losing its leading role against the S&P 500 during the same period of its crash:

If only considering the S&P 500, however, one could argue that nothing is lost yet. After the absurd crash, in fact, BTC has taken the role leader again — although, perhaps, only temporarily:

But one cannot only look at the bright side. Correlations among several markets all address the elephant in the room: while other assets are rallying, BTC is not.

Starting with Palladium, the first element one notices is that after a well-fought battle, BTC and the precious metal diverged in the last month. BTC is not leading against the most valuable metal as it used to.

Plus, although with a month in advance, BTC vs. Gold almost perfectly resembles the fate of Palladium. Both ways, BTC has lost its leading role against the two most valuable metals in the market.

But that’s not all. A similar conclusion can also be drawn on the comparison between BTC and Eurodollars, an important meter of valuation for the global market trends:

Here we can see pretty clearly the diversion between BTC and Eurodollars in 6 months. And if it’s not enough, in a longer period of time — 9 months — the situation does not substantially change:

Back in time, rates were going up while BTC was going down. But then, when BTC caught up the Federal Reserve had to compete with an actual competitor and, thus, settled down the rates.

However, BTC did not meet the Reserve’s expectations, allowing them to re-appreciate the rates. This led to last month’s diversion above and, most importantly, to a regime change after a considerable correlation, that went on from April to September.

Moral of the story: BTC is going down.

To this we should add a newly found feature to check: the GPB/CNY. Cutting short, it also had a diversion. This is probably a direct consequence of the crash we talked about in the last report. As CoinGenius reported, the sudden drop could’ve been a joint effort by Hong Kong outbound cash flows brokered in London:

Checking even only a 3-month chart, the regime change is pretty clear. The same applies for charts presenting longer periods.

To this, we should also add that major events could directly interest the Federal Reserve and the future rates. One among all: Brexit.

If it the UK does not carry out an efficient exit from the EU, the British equity market might know a recession — even for a short term — influencing the rates’ trend. In turn, equity, the Sterling, and BTC might move lower following a recession.

As for now, Brexit seems to have only a contained impact on the British economy, but both the equity market and BTC have become pretty tough elements to forecast.

Some interesting weeks will follow. Meanwhile, we are all waiting for the end of the month.

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