- Bitcoin and ether have decoupled sharply from traditional finance in 2023.
- While maturing as uncorrelated assets, the number of addresses accumulating bitcoin and ether has increased.
If there’s one market development that may be more surprising than bitcoin’s 2023 performance, it may be its decoupling from traditional finance. Its independence from traditional finance arguably comes with both smiles and regrets.
Some investors are likely smiling over bitcoin's ability to weather macro noise, but others may be rueing its lack of participation in the periodic upsides that accompany upbeat events.
As bitcoin investors find comfort in its emergence as a non-correlated asset, they’ve also had to watch as it reacts less to global macro catalysts than its Tradfi counterparts.
Bitcoin’s correlation coefficient with the S&P 500, Dow Jones Industrial Average (DJIA), and Nasdaq Composite has declined 50.5%, 30%, and 49.4% respectively since Jan. 1. Correlation coefficients range from -1 to 1, with the former indicating an inverse pricing relationship, and the latter indicating a direct one.
To be sure, digital asset news has been anything but non-eventful. There have been regulatory overhangs, unfounded rumors of SEC resignations, and speculation around Federal Reserve policy decisions. But outside of its reaction to BlackRock’s ETF announcement on June 15, BTC price action has been relatively lax.
Until a surge above $31,7000 late Thursday – BTC’s first time above that level in a year – bitcoin had been immersed in a three-week bout of range-bound trading and volatility compression. The same has held true for ether, as investors in both assets grew content to sit on 2023 gains, while awaiting a fresh price catalyst.
Macro's Lesser Impact
At the moment, it appears that macroeconomic catalysts that move markets in general are having a lesser effect on bitcoin. Meanwhile, the decoupling hasn’t been limited to just equities.
BTC’s correlation with gold and the U.S. dollar is 0.33 and -0.23, respectively. The proximity to zero for both implies no pricing relationship at all, ironic given early perceptions of bitcoin as an inflation hedge.
Bitcoin’s most consistently positive pricing relationship has been with ether. Despite the differences in the two assets’ utility and consensus mechanism, they have traded in relative lockstep.
Bitcoin and ether’s independence hint at the maturation of the two assets, with sharp moves directly attributable to asset-specific developments.
The lack of reaction from both to Wednesday’s solid inflation report suggests that most of their investors are attempting to sift through the noise. Meanwhile, they appear to be engaging in quiet accumulation rather than rampant speculation.
Since Jan. 1, the number of bitcoin addresses with a non-zero balance has increased by approximately 9%, according to on-chain analytics firm Glassnode. For ether, unique addresses with a non-zero balance increased 11% over the same period.
For bitcoin, the figure continued to rise even as prices declined to $25,000 in May, indicating an underpinning of stable demand despite the downturns.
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