Daily Outlook

Stocks, Greed and Exuberance: 5 Things to Watch in Bitcoin This Week

Stocks under pressure: does “valuation” matter?
The macro outlook seemed more or less stable on Monday. Prior to trading, futures for the Dow Jones, S&P 500 and more were modestly up, despite concerns mounting over coronavirus. Specifically, one source quoted by Bloomberg warned on Sunday, the sentiment is one of worry — both about the spread of cases and the United States’ response to protect the economy. As Cointelegraph reported, Bitcoin has shown no signs of lessening its dependence on stocks in recent weeks. Moves up or down appeared to shape BTC/USD performance, with last week’s trip from $9,000 to near $9,500 and back down again being no exception. Analysts particularly eye the S&P 500, an index with which Bitcoin currently shows a 95% correlation. Coronavirus is also weighing on U.S. consumer confidence, fresh data meanwhile shows, with five indicators all flashing bearish in July after recovering during the two previous months.

A tale of two Fear & Greed indices
On the topic of macro, trader sentiment in cryptocurrency still contrasts with that of traditional markets. That was the conclusion from two incarnations of the Fear & Greed Index, a basket of factors designed to show whether traders are overly risk-off or unduly confident. On a scale of 1 to 100, Monday scored 59, down 7 points from the same time one month ago. The cryptocurrency equivalent measured 43 for Monday and 38 last month. Fuelling traditional “greed” was “extreme greed” in stock price breadth, while derivatives put and call options, along with safe-haven demand, also sat firmly in the “greed” range.

Cash, gold inflows beat stocks in 2020
As Cointelegraph noted, misgivings about stocks’ recovery since March have long persisted in Bitcoin circles. The Fed’s interventions, in particular, have fuelled accusations that the entire atmosphere is now artificial, and “true” value is of limited relevance. Numbers this week show that investors themselves have in fact gone for cash and gold — not equities — in 2020. Inflows into the two assets beat others since the start of the year, similar to 2008-9.

Bitcoin fundamentals stay strong
Monday sees a new Bitcoin difficulty adjustment, the latest in a series of bullish moves that underline miner confidence. With the event just hours away at press time, estimates suggest a difficulty uptick of around 9.5%. This is much stronger than the previous move two weeks ago, which was stagnant, and on the way to matching last month’s 15% surge, which was the largest since early 2018.

Warnings remain over derivatives
Bitcoin futures markets generated few opportunities for price movements over the weekend. Low volatility means that markets will begin Monday in a similar position to that at which they ended on Friday. If Monday and Friday do not match, a “gap” opens up in futures markets which the BTC/USD spot tends to fill in subsequent days or even hours. Nonetheless, futures remain a source of suspicion for some. As Cointelegraph reported, in-house analyst filbfilb warned last week that weak performance could be a sign of worse to come.

Stocks, Greed and Exuberance: 5 Things to Watch in Bitcoin This Week, CoinTelegraph, Jul 13

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