Bitcoin Forum

If you follow the bitcoin (BTC) price movement, it will seem connected to traditional assets - but it can't be, as it's the opposite of today's financial infrastructure, according to Chamath Palihapitiya, CEO of venture capital firm Social Capital, Chairman of commercial spaceline Virgin Galactic, and a former Facebook executive.

"The more people obsess about price action and the more that they want it to behave like a stock or a bond the more frustrated they're going to get they're going to find ways of connecting dots that don't exist; it's just not what it is," said the investor in a recent interview with CNBC.

In that case, BTC might appear correlated to other assets, he said:

"But the reality is it's fundamentally not, because it is underpinned by a set of beliefs that are completely orthogonal to the orthodoxy that runs the world today, and it is completely the inverse of how the financial infrastructure of the world operates."

https://cryptonews.com/news/bitcoin-can-t-be-correlated-to-traditional-assets-virgin-gal-7930.htm

In theory he is right.  In practice right now, ETFs and other financial products that let more people purchase it are necessary to inject more stability into the market. An ETF (or 10) with a large market volume would take over price discovery from the exchanges.  More market depth on the exchanges, in part funded by ETF investments is important for price discovery and stability.

So, what he says is true, it isn't always reflected in the fiat price.

@blacky90. That is his personal opinion but the data disagrees hehe. Bitcoin has followed the movements of the S&P500 for as high as 84%. I cannot find the correlation calculator, however. It was @figmentofmyass who shared it on an older thread.

But many of the people who buy it will be the exact same people who are dicking with stocks.

There's a really weird blind spot many commentators and others have about this. They seem to think Bitcoin lives in its own little vacuum where the rest of the world is mysteriously shut out.

It's those pesky humans who decide its course and movements and they're rather samey wherever you go. Until they get hungry and bubble it's going to behave much like many other things.

in theory, they may be right. in practice, bitcoin is barely more than a decade old---a brand new asset class and type of technology. we should expect the market to treat it as a speculative asset, at least for now.

i figure it will become less speculative, and may de-correlate from stocks, as it becomes established in terms of adoption and mainstream legitimacy. i really don't know though, and we could be talking decades from now.

@figmentofmyass. At least for now? I disagree. Bitcoin will always be a speculative asset because of the flaw in its monetary system. I would also expect more volatility with less coins being traded but with more leverage and more coins held by institutional whales similar to Michael Saylor and Barry Silbert.

what flaw?

let's say hypothetically that mass adoption has already happened and bitcoin usage has penetrated most of society. wouldn't that inherently make it less speculative? after mass adoption has already occurred, there must be diminishing returns on speculation. imagine speculating about whether refrigerators would get adopted after everyone already has one in their house. because adoption, and whether bitcoin catches on x years from now---that's what traders are speculating about today.

After several thousand years gold is still largely speculation, or perhaps that has grown as its usage as any sort of money has waned with more useful things coming along.

But deflation/hoarding will be just as big a factor in stopping it progressing into a currency, perhaps the prime one in time.

Cryptocoins that have limited supply will always give the advantage to the early adopters and investors because the more people own and hold them early, there will be less in circulation. We have witnessed this get rich quick phenomenon many times not only in the cryptospace and this will never change.

Also, early adopters or whales will gain unfair economic influence over the coin and the late adopters.

Your refrigerator argument is not a good comparison. Refrigerators have never pumped and dumped in exchanges and they are of unlimited supply.

It can also be argued that a cryptocoin's limited supply is the obstruction to its mass adoption.

look at it another way: how speculative is gold, compared to bitcoin? not just in terms of volatility, but in terms of acceptance and legitimacy? sure, traders push gold prices around, but i think most of the world views bitcoin with much more binary expectations---ie mass adoption vs niche currency/irrelevance. the gold market has already achieved mass adoption. it isn't speculative on that level.


there is always the possibility that our culture shifts away from consumerism and debt, and towards hard money and saving. for example, if most people are only willing to accept hard money like bitcoin or gold for payment, that acts as pressure against the hoarding tendency.

@figmentofmyass. Your possibility is only just a speculation and we have never seen any sign that our culture will shift away from consumerism. I reckon it is in our nature to need to have the latest stuff. I also reckon that it is this very nature that sped up our technological advancement.

I would speculate that if we had a culture only of saving, our technological advancement might be stuck in the 1950s hehehe.

If you're talking about realized correlation, the figure was probably taken from here:

https://analytics.skew.com/dashboard/macro

I can't link the chart itself directly, but it should be pretty easy to find. The one-month correlation currently stands at around ~54%.

One thing worth noting though:


They absolutely aren't correlated fundamentally, but as more people start using them for the same things, they can easily mirror each other's price movements. It's too early to tell if they'll ever correlate consistently, but it's certainly a possibility.

@jseverson. This correlation might presently be low now, however, I reckon the biggest moves of bitcoin was where it had the highest correlation with the S&P.

Price history has shown this.


https://blog.bitmex.com/wp-content/uploads/2018/03/bloombger.png

Source https://blog.bitmex.com/bitcoin-price-correlation-record-high-against-the-sp-500/



https://i.ibb.co/pKdXgJj/DFEC854-B-F30-D-4-BF6-B69-F-0-F7-AB88-A1507.png

Source https://www.tradingview.com/chart/BTCUSD/sPxfmxJ2-BITCOIN-The-day-it-became-fully-correlated-with-S-P500/



Also, Tom Lee's comment on Twitter.

Macro is favorable for #Bitcoin  but tough if equities selling off

Source https://twitter.com/fundstrat/status/1301724535268536320

This might sound negative for a lot of people here but what he said is the truth and it might hurt a lot of people. Bitcoin from the start is know to be a volatile asset and what of the reasons why is fundamentals for it are totally absent and what's fueling its movement most of the time is simply the demand and supply for it as well as the news that can influence the buy and sell orders. That's why if you always see people talking about analysis in a fundamental way they are simply people trying to look smart in front of you. FA is mostly about the financial performance of the asset which Bitcoin doesn't have, it's not earning any profit, no assets or liabilities, no dividends basically things that you can compute to start creating FA.

@Harlot. I have observed that many people in the community have speculated and sometimes force a notion that bitcoin will be the only safe haven during a financial crisis. However, nothing in its price history has shown that you can buy today and be assured safety from loss during a crisis.

We'll have to wait and see. I think it's laughable myself but there are also different types of safe haven. Nothing will save you when everything's turning to shit. If you live in a country with a weak currency and also controls over moving it then it could well be pretty darned handy in a way few other things are.

Coins were (and still are) made of gold for thousands of years. Gold is the most successful monetary substance of all time, there are countless songs, stories & art from several millennia as testament (not to mention all the actual gold itself, lol). Coins are money.

It's true that people saved it. That's about the only tiniest scrap of truth I can glean from your post.

Agreed. Bitcoin is very useful for evading capital controls, evading taxes and many different types of criminality. Many people in the community appears to have lost the notion of disruption. Everyone these days only wants this to pump and get rich quick hehe.

There's criminality and then there's using a tool to fight the illegitimate tossers whose criminality is being inflicted upon you. I'd say for the vast majority it's the latter. It's one thing to be a Hamptons fat cat using BTC to sneak around, quite another if you're in a corrupt, or more corrupt, poo hole with the walls closing in on you.

that's an oversimplification of the issue. the degree of consumerism pervading society is not static and IMO is directly linked to savings rates. regardless, the real issue is that people used to save money. now they don't. whether that trend is reversible, i don't know, but it's certainly possible. https://www.theatlantic.com/business/archive/2016/04/why-dont-americans-save-money/478929/

It's new but it still plays by the same rules as the stocks.

People say it cannot be stopped but it can be significantlu slowed down by laws, see China, Russia, and many other countries.

It definitely follows the world investment trends. When stocks fall Bitcoin also falls. It can pump and fall on its own because it's a small ecosystem but it is influenced by the big world around it, and the most important part. It is bought for fiat currencies. When people want to get it they use banks to tranfer money. You influence fiat currencies you influence the price of Bitcoin.

It might not be static, however, it is in our nature. We have always been hungering for the latest and shiniest things to buy. It has been like this in all of human history. The more shiny things you have, the higher status you want appear to be on. That is us.

Also, I would argue that it is not strongly linked with savings anymore because of credit cards. Banks have been issuing credit cards with minimum background checks in many countries.

An economy of savers will not develop and move as fast, I reckon.