Crypto Sends Unprecedented Bullish Signal as Price of Bitcoin, Ethereum, BNB, XRP, Solana, Cardano, Shiba Inu and Dogecoin Blast Higher

Crypto prices have recently been behaving in a way that they haven’t done in a long time.

In the last week, all major stock benchmarks were deep in the red. The S&P 500 cratered to 3,600, hitting its lowest level since December 2020. And both the Nasdaq and Dow were down around 5%.

Meanwhile, crypto has unexpectedly plunged in the opposite direction. In the same time frame, the price of bitcoin jumped 6%, ethereum is up 4%, and many major altcoins posted near-double-digit gains. (BNBGDP
XRPXRP
solana, dogecoin and shiba inu are up 4.6%, 3.5%, 4.1%, 2.1%, 1.9% while terras luna and cardano are down 7.3% and 4.4%).

This disconnect came as a big surprise because for much of 2022, crypto moved in step with stocks.

As I wrote back in April: “Major cryptos are highly correlated to the stock market. They also have a high beta to stocks. That means cryptos actually amplify stock movements. If stocks rise, cryptos rise higher. And vice versa. If stocks go down, crypto in freefall Not only that, both the correlation and beta have increased significantly since the start of the pandemic, according to the IMF.”

And until very recently, this correlation remained at record high levels. So, is the long awaited crypto decor relationship here? Or is there something else at play?

Zoom out

The answer is yes and no.

There are two theories that explain crypto resilience in the face of market turmoil. The first is that crypto has gained a critical mass of long-term investors (aka HODLers) who have enough conviction to last through the crash.

In a recent note, Bitnex wrote that its data shows the “anomalous” increase of bitcoin HODLers despite the bear market: “Number of HODLers in top 5 categories (up to 0.1 BTC)BTC
) has been growing in bearish market conditions since April 2022, which is anomalous with previous bear market data. This is further evidence that retail investors and crypto adoption are growing even as macro conditions face headwinds.”

Glassnode’s on-chain analysis confirms that HODLing is at record levels and is having a profound effect on bitcoin prices: “The cohort of investors with older coins remains steadfast, refusing to spend and exit their position on any meaningful scale… with mature spending severely dampened, the degree of HODLing behavior is historically high.”

The other theory is that this short decorrelation is just short-term noise because crypto was simply quicker to digest macro news and corrected in full before the stock market.

“[The Fed] was heavily ahead in crypto, and we therefore see a correction before the shares have even moved at all, says Wilfred Daye from Securitize Capital to Bloomberg. “This has been a pattern we have seen repeatedly with event-driven moves recently due to the relative immaturity of crypto markets and their participants.”

Looking forward

With just a few weeks after decoupling, it’s too early to call a full-fledged crypto “decoupling” from stocks. On the other hand, in the case of bitcoin, HODLer conviction alone gives hope that further downside is limited.

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