Crypto-Specific Contagion Engenders Bitcoin’s Long-Waited Decoupling From Equities

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Written By: Marcus Wang and the Crypto Insights Team

Edited by: Charmyn Ho

Macro and Overall Risk Sentiment

As we approach the end of a brutal year, risk appetites are dialing up as professional traders dip back into equities, and the demand for memecoins remains high. The latest revival of sentiments was fueled by speculations about the Federal Reserve’s slowing down rate hikes. This followed a similar setup in early August when institutions jacked up exposure, and memecoins soared. Unfortunately, it did not end well for the bulls. However, many experts see the potential for a perfect rerun this time. Hopes for signs of reprieve had to come to grips with relatively tough conditions on Friday, when US employment and wage growth surpassed forecasts, pointing to enduring inflation pressures facing the Fed.

The crypto market moved in tandem with the traditional financial space, flipping from positive to negative in early November. However, the performance of major cryptocurrencies pales in comparison with that of equities. BTC finds support in the range of $16k to $17k after reaching a new three-week high near $17.4k and is poised for a slow momentum toward the bullish zone. BTCUSDT pair closed the week with a 4.05% increase, while ETH outperformed its counterpart with a 7.14% week-on-week.

BTCUSDT Perpetual

Followed by Fed Chair Jerome Powell’s dovish speech, U.S. equities rebounded remarkably, while Bitcoin’s performance remains relatively flat as crypto-specific contagion strains the largest cryptocurrency, leading to a long-waited decoupling from traditional equities. The correlation between Bitcoin and Nasdaq Composite stands at negative 0.52 as of the time of writing. This persistent decoupling from traditional equities boosts Bitcoin's long-term value as a “Digital Gold”. Once crypto-specific uncertainties are settled in the future, Bitcoin may experience an extraordinary upward rebound.

Since FTX’s fallout, Bitcoin has been range-bound between $15.5k and $17k, showing an early sign of price stabilization. Last week, Bitcoin once broke down to $16k but immediately rebounded back to $17k, painting a bullish “higher low” pattern. Meanwhile, the on-chain metric, Seller Exhaustion Index, surged higher to a level last seen in June, when Bitcoin price bottomed out amidst a slew of crypto insolvencies, suggesting that Bitcoin may have found a bottom at $15.5k.

On another note, the backwardation between Bitcoin near-term futures and the spot has remarkably shrunk from over 2% to 0.72% as of the time of writing. Despite a close to zero funding rate, Bitcoin futures seem to convey an early signal of confidence recovery.

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ETHUSDT Perpetual

Same as Bitcoin, Ether shows an early sign of price recovery after the price stands above the 20-day EMA at $1,250, facing immediate resistance at the 50-day EMA of $1,300. On the daily chart, Parabolic SAR, an indicator used to spot trends and reversals, is flipping from a bearish signal to a bullish one, possibly sending Ether to test the 50-day EMA.

Meanwhile, a remarkably reduced volatility points to improved risk-off sentiment. The price volatility of Ether has dropped from a record high in the wake of FTX’s collapse to where it was, while the implied volatility of ETH at-the-money options across all spectrums of expiry dates almost fell back to levels before FTX’s fallout. All of the above indicates the market has substantially factored in the toll from FTX-induced volatility, and investors’ sell-offs have been halted. If the unfolding FTX saga does not bring surprises, Ether may have possibly seen solid support in the range of $1,200 to $1,300.

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Altcoin Outperformer

While major cryptocurrencies slowly regained momentum in the past week, this hidden gem outperformed the broader market with double-digit percentage gains. Fantom Network’s native token FTM is up 29.84% week-on-week on the back of bullish news on its treasury reserve. Fantom’s advisor Andre Cronje, a long-serving figure in the DeFi space, revealed that the Fantom Blockchain is now cash positive, having more than 30 years' worth of cash runway. The announcement proves to be a positive catalyst for FTM’s price actions.

FTMUSDT Perpetual

On the 1-day chart, FTM experienced a multi-day layup that pushed the token to test the resistance zone near $0.26. The price retraced slightly but found support near the $0.235 level. RSI for the pair is on the high end but has yet to crossover to the overbought territory. However, the momentum is weakened as the MACD displayed with a histogram moves to negative territory on the 4-hour chart.

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