Bitcoin’s Price Counters the VIX, Confirming It’s Still a Risk Asset

Evidence is emerging that bitcoin has yet to truly earn its reputation as an “uncorreleated asset.”

Case and point, bitcoin’s latest sell-off from $6,000 to nearly $3,000 was accompanied by a surge in the CBOE Volatility Index (VIX). The VIX measures the 30-day forward-looking volatility of the S&P 500 to gauge the market’s fear and risk tolerance, which is why it is commonly referred to as the “fear gauge” for the broader U.S. stock market. 

In theory, the VIX should be low when the S&P 500 is in a steady uptrend and should only rise as does fear, causing panic selling and for either smart or weak hands to be shaken out of the market.

Bitcoin, being a store of value that isn’t the product of a government, is advertised to be unaffected by the perceived fear or risk in any market, yet as the chart below shows, that is not yet the case.

BTC/USD vs. VIX

The VIX printed two significant peaks in 2018. The first occurred on Feb. 6 when it reached 50.3 and the second on Dec. 24 when it reached 36.1.

At the first peak, the S&P 500 was down nearly 10 percent from its January highs and on the second peak it was down closer to 20 percent from the record highs achieved just two months prior.

Needless to say, fear was, and still is, prevalent in the broader U.S. Stock market, which should have resulted in either a stable or bullish bitcoin, right?

Wrong. Bitcoin inversely correlated with the VIX on both occasions. When the VIX reached its first peak, bitcoin had just finished falling 70 percent from its January highs and during the second peak, its price had just declined another 50 percent.

Bitcoin’s negative correlation with the VIX shows it performs poorly when fear in the U.S. equities market creates a “risk-off” environment – by definition, the opposite of a safe haven asset.

Gold vs. Bitcoin

For reference, the globally recognized safe haven asset, gold, positively correlated with the VIX during its two major peaks in 2018.

During the VIX’s February high, gold (US$/OZ) largely traded sideways between $1,300-$1,370 and only began to fall toward $1,160 in May as the VIX sank and the S&P 500 regained strength.

Gold, again, correlated with the VIX during its December peak. As equities began crashing and fears of a global economic recession circulated, the shiny metal had already been in a 20 week long and more than 10 percent uptrend.  

Indeed, the physical physical store of value is still earning its name as a safe haven asset while the digital alternative has yet to be able to.

Disclosure: The author holds BTC, AST, REQ, OMG, FUEL, 1st and AMP at the time of writing.

bull bear reflection via Shutterstock



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This Former Bitcoin Price Support Is Now Capping Gains

Bitcoin’s (BTC) weekly gains were wiped out at the weekend at a key moving average that previously offered support.

The leading cryptocurrency by market capitalization jumped to highs above $6,750 on Saturday, having weakened the immediate bearish case with a repeated defense of the psychological support level of $3,500 last week.

BTC, however, failed to secure a UTC close above the 21-day MA. More importantly, rejection at that MA hurdle proved costly – BTC fell 3.8 percent to $3,470 yesterday.

So, it could be argued that the MA line, which served as strong support in the two weeks leading up to Jan. 10, has now taken on the role of stiff resistance.

As of writing, BTC is changing hands at $3,527 on Bitstamp, representing a 4.30 percent drop on a 24-hour basis. Meanwhile, the 21-day MA is seen at $3,732.

The strong pullback from the 21-day MA indicates that the “sell on rise” mentality is still quite strong. After all, the primary trend is still bearish, as represented by the downward sloping 10-week moving average (MA).

The probability of a sustained break below $3,500 remains high while BTC is held below the newfound resistance of the 21-day MA.

Daily chart

As seen above, BTC failed at the 21-day MA on Saturday and fell back to $3,500, reinforcing the bearish view put forward by the downward sloping 5- and 10-day exponential moving averages (EMAs) and the 14-day relative strength index (RSI) of 42.00.

As a result, the probability of a drop below $3,500 has increased. That would only bolster the bearish technical setup and open the doors to December lows near $3,100.

However, the bearish case would weaken if BTC secures a UTC close above the 21-month MA of $3,732.

Weekly chart

The long upper shadow (spread between high and close) attached to last week’s candle represents the “sell on rise” trader mentality – after a quick rise, a selloff erased the gains.

The primary trend remains bearish as long as BTC is trading below the downward sloping 10-week MA.

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  • BTC’s pullback from the 21-day MA may embolden the bears to push prices below $3,500. Acceptance below that level would expose the December low of $3,122.
  • A convincing move above the 21-day MA of $3,732 would weaken the bearish case and open up upside towards $4,000. However, the primary trend is bearish, so forcing a move above the 21-day MA could be a tough task for the bulls.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View



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Bitcoin Price Consolidation May Have Weakened Bear Case

Bitcoin’s eight-day stretch of consolidation looks to have weakened the prospects of a drop back to December lows near $3,100.

The leading cryptocurrency by market value has been restricted to a narrow range of $3,500 to $3,700 since Jan. 11.

That range play is somewhat surprising, as BTC had set the stage for a quick slide toward December lows near $3,100 with a 9 percent drop on Jan. 10 – the biggest single-day decline since Nov. 24. Notably, prices fell to $3,500 that day, erasing the hard-fought gains of the preceding two weeks.

Despite the sharp bearish reversal, a convincing break below the psychological support of $3,500 has remained elusive for eight days.

That could be considered a sign of sellers unwilling to offer the cryptocurrency so low in the bear market. Put simply, the probability of a drop to December lows has diminished, courtesy of the range bound activity.

As a result, range breakout and a re-test of $4,000 could be in the offing. As of writing, the cryptocurrency is changing hands at $3,620 on Bitstamp.

Daily chart


As seen above, BTC fell sharply on Jan. 10, confirming a bearish doji reversal. The relative strength index (RSI) also fell back into bearish territory below 50.00.

Still, the psychological support at $3,500 has held ground.

Hourly chart

The descending triangle breakout on the hourly chart could be considered evidence of bear failure at $3,500 resulting in positive price action.

More importantly, the triangle breakout has opened the doors to $3,724 – the neckline of the inverse head-and-shoulders pattern.

A move above $3,724 would confirm a bearish-to-bullish trend change on the hourly chart and allow a stronger rally to $4,000 (target as per the measured move method).

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  • BTC’s range play likely represents bearish exhaustion.
  • An inverse head-and-shoulders breakout, if confirmed, would open the doors to the psychological hurdle of $4,000.
  • Acceptance below $3,500 would reinforce the primary bearish trend (downward sloping 10-week MA) and boost the probability of a drop to $3,122, although this scenario now looks less likely.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; Charts by Trading View



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Bitcoin Price Volatility is Down 98% Year-on-Year

Bitcoin price volatility has crashed in the last 12 months as the bear market killed off the speculative frenzy.

The daily volatility, as represented by the spread between the price high and price low, stood at $61 yesterday – down a staggering 98 percent from $3,468 seen on Jan. 16, 2018 – according to CoinMarketCap. That is hardly surprising, as BTC is currently down 74 percent from $13,836 (price on Jan. 16, 2018).

Still, the daily volatility was unusually high  – the cryptocurrency had witnessed a 26 percent move (high-low difference divided by price) on Jan. 16, 2018 – which indicates that the cryptomarket frenzy was at its peak.

The daily volatility, however, subsided as the year progressed. For instance, the average daily volatility in the first quarter of 2018 was $973. In the following three quarters, it dropped to $345, $245 and $195, respectively. Meanwhile, in percentage terms, the average daily volatility fell to 3.6 percent in the fourth quarter from the first quarter’s print of 9.14 percent.

Further, the new year has begun on a dull note. The daily volatility has remained largely below $200 and hit a 2.5-month low of $45.17 on Jan. 12. Many consider the slide in volatility a sign of speculative froth leaving the market.

It is worth noting that an extended period of low volatility usually ends up paving way for a big move. Therefore, BTC could soon violate the six-day-long trading range of $3,500 to $3,700.

Moreover, a range breakdown looks likely as the long-term technical charts are biased toward the bears. As of writing, BTC is changing hands at $3,585 on Bitstamp.

Weekly chart

As seen above, BTC fell 13 percent last week, reinforcing the bearish view put forward by the descending 10-week moving average, currently at $3,919.

The outlook remains bearish as long as BTC is held below the 10-week MA.

4-hour and daily chart

BTC has created a diamond pattern on the 4-hour chart. A breakdown (4-hour close) below $3,575, if confirmed, would signal a resumption of the sell-off from the Jan. 10 high of $4,036 and could yield a deeper drop toward the December low of $3,122.

The relative strength index (RSI) is biased bearish at 41. So, there is plenty scope for a sell-off post-breakdown

Put simply, the prospects of BTC breaking the $3,700-$3,500 range to the downside would rise significantly after the diamond breakdown is confirmed.

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  • BTC is more likely to see a downside break of the $3,700-$3,500 range.
  • $4,000 would be back on the table if BTC defies the bearish setup on the long term charts with a move above $3,700.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; price charts by Trading View



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Will Bitcoin’s Price Extend Its Four-Year January Losing Streak?

Bitcoin (BTC) has reported losses in January for the last four years, and a fifth now looks on the cards.

The leading cryptocurrency by market value fell 32 percent, 14.6 percent, 0.10 percent and 26.64 percent in the first month of 2015, 2016, 2017 and 2018, respectively, according to CoinDesk’s Bitcoin Price Index.

Notably, the odds are stacked in favor of BTC extending the four-year January losing streak this year.

BTC fell 13 percent last week, signaling an end of the corrective bounce from the December low of $3,122. The sell-off reinforced the bearish view put forward by the downward sloping 10-week simple moving average. As a result, a drop to $3,122 in the next couple of weeks cannot be ruled out.

That said, the probability of BTC posting gains this month would rise if the former support-turned-resistance of the 21-day moving average (MA), currently at $3,768,  is convincingly scaled in the next few days.

As of writing, BTC is changing hands at $3,611 – down 2 percent from the monthly opening price of $3,689.

  • As seen above, BTC’s 32 percent drop in January 2015 marked an end of the four-year January winning streak.

3-day chart

As seen above, BTC failed to cut through the 21-candle MA earlier this month, strengthening the bearish view put forward by that downward sloping line.

Further, the drop to $3,476 (Jan. 13 low) invalidated the bullish trend change signaled by the outside reversal candle of Dec 20.

So, it could be argued that the path of least resistance is to the downside.

Daily chart

The 21-candle MA on the daily chart acted as strong support on multiple occasions before it was breached on Jan. 10.

Therefore, bearish pressures would weaken somewhat if prices cross the 21-candle MA, currently at $3,768, in the next day or two. That would boost the prospects of BTC closing above the monthly opening price of $3,689 on Jan. 31.

View

  • The probability of BTC extending the four-year January losing streak is quite high.
  • BTC risks falling to $3,122 in the near-term, having validated the bearish 10-week MA with a 13 percent drop last week.
  • BTC may snap the four-year January losing streak if prices weaken the immediate bearish pressures with a move above the 21-day SMA in the next couple of days.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; price charts by Trading View



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Bitcoin Futures Now Trading At Discount to Exchange Prices

Signs are emerging that the futures market may not be impressed by bitcoin’s recovery from 15-months lows in December – at press time, the cryptocurrency’s spot price is higher than the futures price.

As of writing, the global average or spot price calculated by CoinDesk’s Bitcoin Price Index (BPI) is currently $3,650 – up 16.9 percent from the low of $3,122 reached on December.

Meanwhile, futures contracts are trading below the spot price.

BTC futures

As seen above (CME chart), January futures are reporting a $20 discount (futures price-spot price). Further, contracts expiring in February, March and June are trading at a discount of $30, $40 and $80, respectively.

A futures contract is an agreement between two parties to buy or sell a something at a future specified price and date, allowing for investors to hedge or speculate on the performance of the underlying asset. Hence, BTC futures trading at a discount to spot price (also known as market inversion) is a clear indication that the participants are still bearish.

Put simply, bitcoin’s price in one month, two months and six months from now is expected to be lower than its current price. So, it could be argued that the bear market is alive and kicking.

The outlook would turn bullish if the futures start trading at a premium to spot price. Moreover, that is a classic trait of the bull market.

That said, an unprecedented rise in premium serves as a warning sign of market nearing a long-term top. For instance, BTC futures were carrying a staggering $2,000 premium over spot price in December 2017.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

CME director of equity markets Tim McCourt via CoinDesk archives; Charts by Trading View



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This Price Resistance Level May Hold Key to Bitcoin Bull Market

That bitcoin (BTC) may be closing on a long-term bottom is generally accepted by now.

After all, the leading cryptocurrency by market value has dropped by close to 70 percent over the last 13 months.

The challenge now is to pick up early signs of a long-term bearish-to-bullish trend change, which may be possible with the help of the 10-week simple moving average (SMA).

Acting as resistance, that moving average proved a tough nut to crack in the eight weeks to Nov. 14 – the day BTC reentered the bear market with a big drop below $6,000.

Further, BTC has charted bearish-lower highs above the 10-week SMA in the last 13 months. Hence, acceptance above that hurdle could be considered a sign that the process of bearish-to-bullish trend change has begun.

As of writing, BTC is trading at $3,630 on Bitstamp, representing a 2.5 percent gain on a 24-hour basis. Meanwhile, the 10-week SMA is located at $3,919.

It is worth noting that a full confirmation of a longer-term bullish reversal would be a convincing break above the former support-turned-resistance of the 21-month exponential moving average (EMA), currently at $5,400.

Weekly chart

As seen above, BTC repeatedly failed to cross the 10-week SMA on a weekly closing basis (Sunday’s, as per UTC) before falling below $6,000 on Nov. 14.

Prior to that, BTC did cross the 10-week SMA in the last week of both February and April, the third week of July and in the last week of August. These bullish breakouts, however, were short-lived: BTC fell back below the 10-week SMA in the following two weeks, trapping the bulls on the wrong side of the market (marked by arrows).

Put simply, the cryptocurrency has struggled to breach the 10-week SMA throughout the ongoing bear market.

As a result, only a sustained break above the 10-week SMA (at least four weekly candles above the average) would imply bullish reversal.

The outlook remains bearish as long as prices are trading below the downward sloping 10-week SMA of $3,919.

Daily chart

BTC closed back above $3,566 (Dec. 27 low) yesterday, establishing a sideways channel on the daily chart.

With the weekly chart still biased toward the bears, the lower end of the channel, currently at $3,465, could be breached soon. A channel breakdown, if confirmed, would boost the prospects of a drop to the December low of $3,122.

View

  • A sustained break above the 10-week SMA could be considered an early sign of long-term bullish reversal, although prospects of a near-term move above that average look bleak.
  • A channel breakdown on the daily chart would bolster the bearish setup and allow a test of demand around the December low of $3,122.

 Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; Charts by Trading View



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Bitcoin Risks Return to December Lows After Price Drop to $3.5K

After breaching key support on Sunday, emboldened bears could soon push bitcoin (BTC) prices back towards $3,100.

Following a drop to a 3.5-week low of $3,476 at 16:00 UTC yesterday, the cryptocurrency closed at $3,516, effectively invalidating the bullish view put forward by the higher low of $3,566 carved out on Dec. 27.

That move also added credence to the bearish reversal signaled by the 9 percent price drop witnessed last Thursday.

Put simply, the bears have strengthened their control of the market, after the bulls failed to penetrate the head-and-shoulders neckline resistance of $4,130 and build a stronger rally last week.

As of writing, BTC is changing hands at $3,530 on Bitstamp, representing a 2 percent drop on a 24-hour basis.

Daily chart

As seen above, BTC found acceptance below $3,566 (Dec. 27 low) yesterday, validating the bearish doji reversal confirmed on Jan. 10.

The 14-day relative strength index (RSI) is reporting bearish conditions at 42.00, having breached the ascending trendline last week. Further, the 5- and 10-day moving averages (MAs) are trending south, indicating bearish setup.

So, it could be argued that the recovery rally from the December low of $3,122 has only ended up recharging the engines for a fresh sell-off.

3-day chart

BTC’s fall back to $3,500 has invalidated the positive view put forward by the three-day bullish outside-reversal candle of Dec. 20.

Moreover, the cryptocurrency’s failure to produce a significant price rally despite the positive divergence of the RSI, confirmed on Dec. 14, indicates that the bearish sentiment is still quite strong.

Weekly chart

On the weekly chart, BTC has created a bearish outside-reversal candle (last week’s price action engulfed the previous week’s high and low) signaling a resumption of the primary bearish trend, as represented by the downward sloping 10-week  moving average (MA).

View

  • BTC could re-test the 200-week MA of $3,266 in the next few days and could extend the decline to the December low of $3,122.
  • A weekly close (Sunday as per UTC) below the 200-week MA of $3,266 would open the doors for a deeper drop below $3,000.
  • Acceptance above the downward sloping 10-week MA, currently at $3,919, would abort the bearish view.

 Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; Charts by Trading View



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Bitcoin Price Looks South After Worst Daily Loss Since November

Bitcoin’s (BTC) price saw its biggest drop for seven weeks on Thursday, weakening the prospects of a bullish breakout above $4,100.

The world’s largest cryptocurrency by market value hit a 3.5-week low of $3,503 yesterday, before closing (as per UTC) at $3,627 – down 9.4 percent on the day. That was the biggest single-day drop since Nov. 24 and the fourth biggest daily loss of the last two months, according to CoinDesk’s Bitcoin Price Index (BPI).

Essentially, the hard-fought gains of the last two weeks have been erased in the last 24 hours. The cryptocurrency had carved out a bullish-higher low near $3,550 on Dec. 27 before crossing $4,000 on Jan. 6.

The follow-through to break above $4,000, however, was anything but encouraging. Moreover, signs of bullish exhaustion emerged near the crucial resistance of $4,130 (inverse head-and-shoulders neckline) and the demoralized bulls exited the market yesterday, leading to a sharp drop in prices.

As a result, the bears may be feeling emboldened and could attack the crucial support lined up near $3,550. As of writing, BTC is changing hands at $3,630

Daily chart

Bitcoin fell to $3,500 yesterday, confirming a bearish doji reversal on the daily chart. The cryptocurrency also closed below the crucial 50-day moving average (MA) support,

Further, trading volumes jumped to the highest level since Dec. 21, adding credence to the bearish move.

What’s more, the 14-day relative strength index (RSI) has breached the ascending trendline in favor of the bears.

With the odds stacked in favor of the bears, the immediate support of $3,566 (Dec. 27 low) could be breached soon. That would only bolster the already bearish technical setup.

Weekly chart

On the weekly chart, BTC has created a bearish outside reversal candle – this week’s price action has engulfed the previous week’s high and low – having failed to penetrate the 200-week exponential moving average (EMA) for four weeks straight.

The candlestick pattern indicates that the week began with optimism, but is coming to close on a pessimistic note. As a result, it is widely considered a sign of bearish reversal.

Put simply, the doors have been opened for a re-test of the 200-week MA lined up at $3,250. Supporting that bearish case is the downward sloping 10-week MA.

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  • BTC risks breaching the bullish-higher low of $3,566 over the weekend. That would add credence to the bearish setup on the weekly chart and open the doors to $3,250 (200-week SMA).
  • A quick recovery above $4,000 would abort the bearish setup, although the probability of BTC picking up a strong bid in the short-term is quite low.
  • A convincing weekly close (Sunday’s UTC close) above the 200-week EMA $4,148 will likely put the bulls back into the driver’s seat and allow a stronger rally towards $5,000.

 Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; Charts by Trading View



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Bitcoin Price Tumbles 10% as Crypto Markets Flash Red

The price of bitcoin fell more than 10 percent during Thursday’s trading session as the cryptocurrency erased a large portion of its recent gains.

At 6:00 UTC, bitcoin opened the trading hour at a price of $4,018, but fell to $3,748 before the hour was complete. After trading sideways until 16:00 UTC, the sell-off accelerated to a low of $3,570, according to CoinDesk pricing data.

Bitcoin’s current price of $3,610 reflects a $367 difference and more than 9 percent drop from its 24-hour opening price of $3,995, CoinDesk data further reveals.

In the last 24-hours, a total of $6.4 billion of bitcoin was traded across exchanges as its total market capitalization fell roughly 7 percent from $70 billion to $64 billion.

The broader market has accompanied bitcoin in its latest dip as it usually does when bitcoin markets show weakness.

According to Coindesk’s Crypto-Economic Explorer (CEX), 18 of the 19 tracked cryptocurrencies are reporting double-digit 24-hour losses, with several extending depreciation beyond 15 percent including litecoin (LTC), neo (NEO) and cardano (ADA).

Cardano is the worst performers today, currently printing an 18 percent loss. As it stands, the total capitalization of the cryptocurrency market is registering $122 billion, down 10.2 percent on the day according to CoinMarketCap.

Disclosure: The author holds BTC, AST, REQ, OMG, FUEL, 1st and AMP at the time of writing.

Bull image via Shutterstock; Charts via TradingView



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